Author Archive

Top 3 tricks landlords should steal from Airbnb hosts (but aren’t!)

Written by Sarah Block on . Posted in edited, For Landlords, Income Ideas, Move-in/Move-out, paid, Rental Advertising

Tricks to learn from AirbnbWhen you go on vacation, you expect an experience. Airbnb hosts and other vacation rental owners spend a lot of time on that point.

To stay in demand, vacation rental owners need to understand how to create a great experience for their customers. This keeps their occupancy high, their rental in demand, and their nightly rate at a premium. By thinking like a vacation rental host, landlords can reduce tenant turnover, keep their units in demand, and charge more for rent.

To level-up their business, landlords should provide great customer service and offer tenant “bonuses” to reduce turnover and increase rent. Below are the top three tricks that long-term landlords should steal from Airbnb hosts.

1. Amazing Communication

The top Airbnb hosts have high communication rates. Furthermore, Super Hosts have a minimum of a 90% response rate. How can you replicate this?

  • Use Cozy’s maintenance ticket system to quickly respond to repair issues.
  • Respond quickly when you have requests for a unit showing.
  • Show future tenants how responsive you are by having current and former tenants review your rental property on Google Maps or your property website.

In fact, 82% of Americans at least sometimes seek out reviews before making any kind of purchase. Your prospective tenant will feel more at ease about entering a year-long commitment with you if they can view reviews beforehand. In addition, from the beginning, you are showing them that their time matters.

2. Welcome Package

A welcome package is an essential part of the experience of staying in a vacation rental. It tells guests about the property, local restaurants, and anything else they might need to know to make the vacation as simple and relaxing as possible. Long-term rentals are no exception.

Landlords should have a welcome package that includes:

  • Unit rules and regulations
  • A small welcome gift like flowers, chocolates, or a gift card
  • Location details like public transportation, local restaurants, local events, local attractions, and anything else that might make their move more seamless.

Related: The perfect move-in package

3. Concierge Services

Lastly, landlords can create a wonderful living experience for their tenants by offering premium services included in the rent. This provides an added selling point and makes life just a little easier for your tenant.

Let’s say your usual tenant is in corporate America and pays a premium to outsource tasks. An added bonus to your rental property could be as simple as including maid service, an Amazon Fresh subscription for quick grocery delivery, and laundry service with the rent. By cutting those chores out of your tenant’s life, you’re providing the best gift you can: time.

Related: 4 basic amenities that attract quality tenants

Conclusion

To summarize, it doesn’t need to cost a lot to provide a great experience for tenants. Above all, simply caring about their time matters most. By communicating quickly, providing an informative move-in package, and including time-saving services with rent reduces turnover, allows for a premium rental price, and attracts good quality prospective tenants. So think like a Super Host and start thinking outside the box when it comes to being a top landlord.

How to increase your income without raising rent

Written by Sarah Block on . Posted in edited, For Landlords, Income Ideas, paid

Being a landlord has always given me a sense of pride, hope, and entrepreneurship.

There are so many possibilities in how to make money as a landlord, even without raising the rent, and even without having long-term tenants. The money-making possibilities are endless and exciting.

Related:  How to increase passive income in 2017

Top 10 ways to increase income without raising the rent

1. Add a vending machine

Adding a vending machine to the laundry area, storage, or common area of your property could add significant income. For example, adding an automated vending machine to one apartment building generated $2,500 a week in revenue. People pay for convenience. A vending machine with food, detergent, Chapstick, and toiletries saves people time, and if they run out of something they need right away, the vending machine is a convenient choice.

New vending machines can be expensive, but smaller properties can buy one used for a few hundred dollars and start generating a new income stream immediately.

2. Charge pet rent

In the United States, 68% of households own a pet. While it is understandable to not allow pets in your rentals, a large portion of renters are cut out. By allowing pets and catering to them, you open a floodgate of opportunities. You can charge a monthly pet rent or a pet fee. Tenants will happily pay a little extra to allow for their pet. As a bonus, you can offer dog walking for tenants. Work with a local dog walker. In exchange for a referral, you can get a percentage of the profits.

Related: Pet Deposits, Pet Fees and Pet Rent — What’s the Difference?

3. Use Airbnb during vacancies

Do you have a vacant unit? Don’t stress. Rent it out by the night instead. You will make more per night than with a long-term renter, and you have flexibility with showings. No, you won’t be able to show when you have guests, but you can schedule around the guest calendar. A unit with rent at $1,300 per month might bring in $150/night as a vacation rental. It would only take about nine nights to make up the lost rent.

4. Charge for shed storage

Storage is coveted by most renters. So don’t let your shed go to waste. Even small storage sheds can bring in an extra $35-$50 a month, while larger sheds can bring in as much as $200 a month. Move that lawnmower somewhere else, and take advantage of the extra income.

5. Rent out the garage

When I bought my three-flat, the previous owner was renting out the garage for $200 extra a month! In areas where parking is limited, this is something you need to take advantage of. The amount you can charge per month depends largely on the area. In metropolitan areas, it isn’t unheard of to charge $100-$200 a month. Uncovered parking spots can be rented out for an extra $50-$100 a month.

6. Lease a billboard

If you have a larger building, leasing a billboard can be quite lucrative. One BiggerPockets blogger told the story of a $25,000 fire-damaged apartment building that was getting $2,000 per month per side for a billboard. Imagine $4,000 extra income a month for no extra work.

7. Offer upgrades

Make life a little easier for your tenants by offering upgrades. Think hotel services like dry cleaning, laundry, maid service, or lawn care. People pay extra for their lives to be easier. If they were going to be outsourcing those services anyway, it’s a big bonus to have those available through their landlord or property management company.

8. Lease a cell phone tower

Would you have an interest in earning a passive six figures? That’s well within reason when leasing out space to a cell phone tower. Leasing out space to a cell phone tower averages $1,300 in rent a month. In San Francisco, you can earn as much as $2,500 a month!

9. Provide furnished rentals

Furnished rentals can fetch a higher rental price per month than unfurnished. Corporate, short-term, and cross-country tenants are more likely to rent a furnished apartment and will pay more for it. An extra bonus is that during tenant vacancies the unit can be rented on Airbnb or VRBO. The rent will increase, on average, 25-30% for a furnished unit.

Related: Can I get more money from a furnished rental?

10. Add solar panels

By adding solar panels to your rental property, you can become the utility company. Adding solar panels can generate income in three different ways: 1) increase rent to include energy, 2) sell excess energy to utility company, or 3) charge an electricity bill to tenants for using the solar energy.

In conclusion

Rental income is not the only way to generate money with your rental property. There are many options for adding passive (or not so passive) income to your monthly income. Why not take your rental business to the next level by adding a few new streams of income?

What sparks joy in your rental business?

Written by Sarah Block on . Posted in edited, For Landlords, Income Ideas, Landlord Tips, paid

Marie Joy RentalsMarie Kondo’s new Netflix show “Tidying Up” is inspiring people to find what “Sparks Joy” in their homes. But what about the landlord tasks in your rental business that spark joy in your life (or don’t)?

Landlords have a multitude of tasks involved with their business. Some we love, and some we hate. Life is short. So why aren’t we spending our time doing what we enjoy and outsourcing the rest?

The key is deciding what tasks to keep and what to outsource to someone else. But outsourcing can be difficult for most landlords. Whenever I speak with landlords about this topic, the most common response I hear is, “That reduces my profit.”

It does if you choose to think of it that way. However, if you think of your time in terms of dollars per hour, you factor in how much your time is worth. If you outsource a task you don’t enjoy and it costs less than your value, it frees your time up to make money doing something you enjoy.

Related: How to automate landlord responsibilities

Find what sparks joy in your rental business

One of the bests aspects of being a landlord or property manager is there are so many different things to do to make the business work.

  • Researching and finding the best rental
  • Preparing the unit to be rented
  • Advertising
  • Finding tenants
  • Screening tenants
  • Onboarding tenants
  • Managing maintenance and communication
  • Handling the finances

The hard part about being a landlord is that you are bound to hate some of those tasks.

How to decide what to outsource

Make a list of everything you do for your rental properties—from cleaning to showings—and number them from 1 (what you love) to 10 (what you hate).

Figure out how much money your time is worth. Consider commute costs, how much you get paid doing other jobs, and any other factors that affect the value of your time to determine how much your hour is worth.

Consider whether special tools or equipment are needed for any of the tasks. What is the cost for those tools?

Look at the tasks you marked in your bottom 5.

  • How many hours would those tasks take you to complete? Keep in mind, it will take you longer than an expert.
  • What is the cost of special tools, equipment, or materials for those tasks?
  • What is the going rate for someone to complete those tasks?

Add up the hours it would take for you to complete the task and multiply it by your value per hour. Add in the cost of materials and equipment needed for the task. What is the cost of that task if you complete it?

Now, how much would it cost someone else to complete it? If this number is less than your number, outsource it.

Related: How to find a contractor you can trust

How to increase profits by “Sparking Joy?”

You might be thinking that this method of outsourcing and doing only what sparks joy for you is all well and good. But not actually getting paid during the time you’re outsourcing a task to someone else isn’t ideal.

But what if you can be paid while you outsource?

Look at the top five tasks on your list, the tasks you love doing. Can you offer any as a service to other landlords?

You have experience doing those tasks. You enjoy doing them. Other landlords might have them on the bottom of their list. Why not build a service business doing what you love?

Conclusion

Life is too short to do tasks you hate. Outsource the landlord responsibilities you don’t enjoy doing, and focus on what you do love.

The end result will be better quality work. And you will find more joy in your life.

How to deduct rental business startup expenses on your taxes

Written by Sarah Block on . Posted in edited, For Landlords, paid, Step 1 - Perform Research, Step 14 - Pay Annual Dues & Taxes

Rental Startup Expenses and TaxesIt’s tax season! If you started a rental business this year, you’ll want to know how to deduct all your expenses. Or perhaps you’re researching how to start a rental business and need to know how taxes work.

This guide explains how to deduct startup expenses, what the tax rules are for expenses after you start the business, and changes to the 2018 tax laws that affect landlords.

Rental property startup expenses

Use the $50K rule.

Keep startup expenses under $50,000. You can deduct $5,000 the first year and amortize the rest over the next 15 years. Above that amount, the first year deduction becomes less and less.

The $50,000 limit is easy to meet for most rental businesses. But it can be exceeded with a BRRR—buy, renovate, rent, refinance. That renovation can certainly add up.

What expenses can be deducted during the startup phase?

The “startup” phase is before the unit is rented and no income is coming in. Any expenses that incur during this period are considered “startup” expenses.

These expenditures can include:

  • Repairs that get the unit or property ready to rent
  • Office expenses like office supplies, phone service, or office space
  • Time related to researching rental properties
  • Pre move-in rental expenses such as landscaping, handyman, cleaners, or leasing agent
  • Any business permit or license fees
  • Fees for attorneys, accountants, property managers, or other professional services

When starting up a rental business, try to keep these expenses under $50,000. Do this by holding off on items that can be purchased after the place is rented. Once it is rented, you can deduct your expenses fully each year.

Tax write-offs for rental businesses

Each year, landlords can deduct many of their expenses related to their rental business.

Related: How to track property expenses and streamline taxes

What can landlords deduct on their taxes?

As a landlord, you can deduct many expenses on your taxes. Keep all your receipts and use a CPA (certified public account) to make sure you don’t miss a write-off. Each one counts!

How does the 2018 tax law affect landlords?

Landlords benefited from the 2018 tax law.

An updated pass-through law lets landlords “pass-through” the profits from their rental property to their personal tax rate (IRC Sec. 199A). If you make $30,000 in profits on your rental properties, for example, and your personal tax bracket is 24%, you would pay $7,200 in taxes.

If your rental business qualifies as a business, now through 2026, you can deduct 20% of your rental income plus expenses. From the previous example, if you make a profit of $30,000 from your rental properties, you can deduct 20% from your profit. This brings your taxable income to $24,000. If your tax bracket is 24%, you now pay $5,760 in taxes, saving $1,440. Be sure to ask your CPA if you qualify for this bonus deduction.

Conclusion

The updated 2018 tax law benefits landlords. Make sure you get all the new deductions available to you. Find a tax accountant that understands taxes for landlords. The new tax law is complicated, so it’s time to bring in the experts to get your landlord deductions right.

What to do if you’re underwater on your investment property mortgage

Written by Sarah Block on . Posted in edited, For Landlords, Income Ideas, Mortgages & Loans, paid, Rent & Expenses

Underwater mortgageWhat do you do if you’re underwater on your investment property mortgage?

I have been there. Most likely, many who bought during the infamous real estate bubble have been there, too. In 2009, I thought the bubble had burst and prices dropped as much as they would. How wrong was I? I bought an investment property and quickly became underwater on it. I was drowning on that mortgage, and I didn’t know what to do. However, I had options, and so do you.

Let’s take a look at some baseline numbers to determine your best move.

Are you making a monthly profit?

The first thing you will want to do is look at the month-to-month profitability of the property. While a rental unit might not have equity, it might have profitability each month. To determine the profit you make each month, add up your mortgage, monthly taxes, monthly insurance premium, and anything else you pay. Then, subtract this number from the rental income you make on that property.

(monthly PITI, maintenance, 10% to reserves) – Rental income = Profit

Related:  How to set the perfect rent price for your rental properties

Questions to ask yourself

1. Are you in the positive?

If so, hold out on selling. If you are making a profit, it makes sense to hold the mortgage and wait for the value to increase to build equity.

2. Are you breaking even?

If you are breaking even, it might be a good idea to hold the mortgage. Each year, you pay down the principal a bit more. Your rent check each month brings you closer and closer to the surface. Unless you truly don’t enjoy being a landlord, or it is more work than you can handle at this time in your life, keep it in your portfolio.

3. Are you in the negative?

Did your calculations show that you were in the negative? That doesn’t necessarily warrant selling. Can you foresee an eventual turnaround? Real estate historically increases in value as time goes by.

What if I have a negative cash flow/loss?

For my property that was underwater, I was making negative cash flow the entire time I owned it, but I could afford to cover that cost. I covered the negative cash flow for nine years, knowing that the market would turn around, and it did. Earlier this year, I sold it at a profit. While it didn’t make sense for me to hold it as a rental because my mortgage was too high to ever have a positive cash flow from rent, it did make sense to hold until I could sell for a profit. My renters helped me pay down my mortgage and I made a little money in the end.

Look at your scenario and ask yourself these questions:

  1. Can you afford a negative cash flow?
  2. Will your property ever regain its value?
  3. Do you have consistent renters that help pay down your mortgage balance?

If you answered “Yes” to these questions, it makes sense to hold the property. However, if you answered “No,” it might be time to look at your options.

Related:  When to sell a rental property?

What are your options to sell an underwater property?

When you have an underwater property that you have decided to unload, you have three options:

1. Short sale

To sell a property with a short sale, the owner needs to negotiate with their lender to accept a lower payoff than the balance. An owner or their Realtor can call the lender and speak with the real estate short sale or work out department to begin the negotiation process. Once you have found a purchaser, the lender needs to approve the purchase price and might decline to pay certain added items such as inspections. After the lender approves the purchase price, you can request they do not report this to credit reporting agencies, and they may or may not comply with your wishes.

2. Foreclosure

While no one wants to go through a foreclosure, sometimes choices are limited. When starting a foreclosure, the first step is defaulting on the loan. After 30 days, a lender sends a notice of default. This likely comes after they have reached out trying to change the loan payments to work with your financial situation. After 90 days of being in default, the owner gets a notice of sale. The last step is selling the property at auction.

3. Sell + pay loan balance

You can avoid short sales and foreclosures if you have cash on hand. The last option for homeowners is to sell the property for what it is worth and bring a certified cashier’s check to the closing for the shortfall. While it is not ideal to pay to get out of the mortgage, it keeps your credit intact.

Conclusion

Investment properties with underwater mortgages can make an owner feel helpless and stuck. However, there are options. In my situation, my property was underwater for about five years. I was losing money each month, but it was a manageable amount. I chose to wait it out, and eventually I sold for a profit. But each person’s financial situation is different. Look at yours to determine what the best move is for your lifestyle.

A basic guide to landlord and tenant responsibilities

Written by Sarah Block on . Posted in edited, For Landlords, For Renters, Laws & Regulations, Leases & Legal, Maintenance & Renovations, Move-in/Move-out, paid, Security Deposits

Who’s responsible for what in a tenant/landlord relationship?

I have my fair share of crazy landlord stories. I once had a tenant who wanted to move out a month after moving in. The question was: did they need to abide by the lease even though it just started? A year later, I had a tenant file a lawsuit because they believed damage in the unit was the landlord’s responsibility. So, who was right in each of these scenarios? What responsibilities did each party have?

We are going to dive into the not so fun, but always relevant, topic of responsibility. Laws vary between states, and even cities, so pay particular attention to your jurisdiction’s laws. Additionally, the lease will have specific rights outlined that must be obeyed. To learn specific landlord/tenant laws by state, visit this comprehensive guide.

Top 5 debated tenant/landlord responsibilities

1. Security deposit

Landlords are responsible for returning security deposits, usually within 15-45 days of the move-out date, but this varies by jurisdiction, so be sure to know yours. Landlords who own between 10 and 25 units or more often need to hold the security deposit in an interest bearing account. This also varies by state.

If the landlord is withholding any of the security deposit for loss of rent or damage costs, an itemized list needs to be sent to the tenant within the legal time frame for your jurisdiction. What happens if a landlord ignores this law? They can owe the tenant twice the security deposit plus court fees.

Related: What to do if your landlord wrongfully kept your security deposit

2. Lease termination notice

Occasionally, tenants need to break a lease for various reasons. Whether moving out of state or fighting with a roommate, the law needs to be followed. Annual leases lapse on the date listed in the lease. Although, state-by-state the laws vary, and you might need to give notice that you will not be renewing.

When ending a lease early, additional issues arise. The lease generally outlines requirements for breaking a lease; however, a rule of thumb is that the tenant is responsible for the rent until either the end of the lease or a new tenant takes over the lease, whatever happens first.

Monthly leases, in general, require 30-days’ notice from the date rent is due.

So what happened with my tenant who wanted to move out a month after moving in? When that tenant wanted to break the lease so soon, we went by the lease agreement. The tenant paid a fee to have the unit re-listed and was responsible for the rent until new tenants signed a lease.

Related: Can my tenant break the lease?

3. Damage responsibility

The party responsible for rental property damage is a touchy subject, and the reason is clear. The answer is not cut and dry. The general understanding is that the tenant is not responsible for normal wear and tear but is responsible for the damage they have caused. The question is: what is normal wear and tear?

Normal wear and tear falls within these categories:

  • Minor paint damage
  • Faded or worn carpets
  • Faded lamp and window coverings
  • Lightbulb replacements
  • Rust or mold in the bathroom
  • Smelly garbage disposal

As you can see, normal wear and tear are items that would have happened if anyone was was living in the unit; you, your tenant, your mom, your mom’s tenant, etc.

However, more extensive damage is the tenant’s responsibility, such as:

  • Broken window coverings
  • Holes in the wall
  • Pet damage
  • Broken items—doors, windows, appliances
  • Unapproved decor

And here’s what happened with my tenants who thought damage in the unit was my responsibility: When my tenants sued us over the definition of normal wear and tear, the judge decided that all damage above the wear of general use was considered damage that needed to be repaid. Something to note: the judge did not allow us to charge based on quotes to repair damage, only repair receipts.

Related: The ultimate guide to normal wear and tear

4. Habitability

Landlords have a responsibility to provide a habitable place for their tenants to live. But what does habitability mean? Habitability means a safe and healthy environment. Plumbing, electricity, heating, and (in some areas) cooling need to be in working order. Doors and locks must be working correctly. The structure needs to be sound.

Landlords are required to:

  • Ensure the building structure is intact
  • Maintain common areas
  • Keep utilities in working order
  • Remove rodent infestations
  • Manage environmental hazards

Related: 9 maintenance issues tenants are responsible for

5. Utilities

The party responsible for utilities can be complicated to determine. While landlords have the right to require tenants to pay for their own utilities, the renter has the right to working utilities to meet “habitability” requirements.

A good course of action is to have a solid lease with clear responsibilities. The lease must outline who is responsible for paying utilities. Many utility companies have landlord provisions. A landlord can contact a utility company and set it up so if a tenant does not pay the bill, the landlord is notified. This way, the utilities won’t be turned off for nonpayment, and the landlord can avoid frozen pipes or a lawsuit for a rental property that is not habitable. The landlord can then bill the tenant for the nonpayment, and there should be a provision in the lease for utility nonpayment and associated fees.

In conclusion

While I have acquired some crazy landlord stories during my years in the industry, they have each taught me something new. I became an expert in my local jurisdiction’s rental laws and became better able to protect myself in the future. When taking on a new tenant and lease, re-examine your lease and make sure that the responsibilities are legal and clearly outlined so there are no gray areas. Gray areas are the cause of many landlord and tenant headaches.

I’d love to hear your landlord-tenant stories. Feel free to leave them in the comments below.

Should I accept credit card payments as rent?

Written by Sarah Block on . Posted in edited, For Landlords, paid, Rent & Expenses, Step 6 - Applications & Screening, Step 9 - Manage Lease & Collect Rent

Should I allow rent with credit cardsUsing credit cards can be a tricky game, especially when using them for rent payments.

Do you earn points or miles for travel when you use them? Do you only pay the minimum each month? Or do you pay cash and focus on staying debt free? It gets even trickier when you are deciding whether to use credit cards for large recurring bills such as rent.

Using a credit card to pay rent could be a great way to streamline payments when your monthly expenses and paychecks don’t line up, or it could be a good way to get into major debt.

We’re going to review the pros and cons of using a credit card to pay rent.

Pro No. 1: Evens out the cash flow ebb and flow

Bill due dates often don’t fall in line with paycheck dates so cash flow can become an issue. You may be flush with cash during week three of the month but going in the red week one. Paying rent with a credit card could be a way to avoid that issue. If you set up your bills to be automatically paid with a credit card and automate paying the credit card on pay dates, this method could smooth out cash flow issues throughout the month.

Related: 6 warning signs when screening a tenant

Pro No. 2: Points and miles

According to Million Mile Secrets, paying rent with a credit card to earn miles and points is a method to earn extra points. Many credit cards provide perks such as early release concert tickets or a special airport lounge if you spend an annual minimum. Paying rent with a credit card is an option to meet that minimum if you have great perks to offset fees.

Pro No. 3: Builds credit

Someone with little to no credit could build their credit score by paying rent with a credit card. Each time you put the rent on the card and pay it off, you improve your credit score and prove your creditworthiness.

Con No. 1: Can lower your credit score

If you are not paying off your card every month, not only will your debt add up quickly, but your credit score can suffer. For those with a low credit limit, it won’t take long for your debt percentage to rise. When you are using a high percentage of your available credit, your credit score can go down, which hurts you anytime your credit is checked. When you are looking for a new car, lease, or credit card, a poor debt-to-credit ratio could raise your interest rate or result in a rejection.

Con No. 2: Credit card fees

When rent is paid with a credit card, there will always be a fee. Cozy has a standard 2.75% credit card processing fee. Look at your bills, points, and credit card perks to determine if the 2.75% fee is worth it. Rent that is $1,500 a month would result in a $41 fee each month. Are your points worth it? On the other hand, if you couldn’t pay rent on time without a credit card, would the $41 be less than a late fee?

Related:  My tenant won’t pay late fees, now what?

Con No. 3: You’re playing with fire

Do you have a history of high debt? If so, it might be a bad idea to use a credit card to pay rent. It’s easy to pay the rent with a credit card, but it might be difficult to pay the card. This could cause your debt to increase exponentially. Without the ability to pay the credit card off each month, not only will you be paying the processing fee, but also the interest rate. Your debt can get out of control, depending on your interest rate.

The landlord’s perspective

As a landlord, I would accept credit cards. Before accepting a tenant, landlords complete a credit check, reference checks, pay stub verification, and background checks. We are fully aware of the financial lives of our incoming tenants.

If you are comfortable entering a lease with a new tenant, then trust that they can decide whether paying rent with a credit card makes sense for them.

How to automate landlord responsibilities

Written by Sarah Block on . Posted in edited, For Landlords, Leases & Legal, Maintenance & Renovations, Move-in/Move-out, paid, Rental Advertising, Screening, Software, Step 1 - Perform Research

Landlord automation - life's a beachWhen I became an accidental landlord in 2011, all I knew for sure was that I needed a tenant, and fast.

Over the years, I have learned how to manage my properties through systems and processes that practically automate all landlord responsibilities. Since then, I like to say “life’s a beach” . . . or at least that’s true for my life as an independent landlord. Today, I’ll share my landlord automation secrets.

Step 1: Finding a tenant

The first thing I do with my rentals is to take great pictures that showcase the properties and surrounding towns. I write ads that help prospective tenants see themselves in that environment.

Related: How to Write an Attractive Property Listing in 8 Steps

From there, I create a Google Drive folder and put photos and ad descriptions in it as well as a Google calendar for showings.

This is where the automation comes in.

  • Post your ad through syndication sites like Apartments.com and Cozy’s Property Listing portal.
  • Use an app like Calendly to automate scheduling showings, which populates on your Google Calendar.
  • If you want, you can even automate showings by using smart technology like Rently that allows prospects to schedule the showing from their smartphone and open the door for them. I wouldn’t recommend doing this one though if there are current tenants. Also, there is no replacement for meeting a prospective tenant in person.
  • The rental application can be done online for free with Cozy’s rental application. The application includes a background and credit check, which is always recommended.

Step 2: Set up lease and rent collection

Creating a lease and rent collection system is the most important step. If your lease isn’t legal or your payments aren’t automated, that is potential money out of your pocket.

Have an attorney create your first lease, ensuring that it is compliant with your local area.  This lease can be customized for all other tenants. So, it is a one-time cost that will save you big money throughout the life of your rental.

  • Use DocuSign to have the tenant sign the lease and store on Google Drive or your Cozy portal, providing access to your new tenant.
  • Set-up automatic rent collection with Cozy’s rental payment portal. It’s free for both the landlord and tenant as long as they pay with an ACH. A bonus: Cozy automates late payments.

Related:  The landlord’s guide to rent collection

Step 3: Move-in checklist

Think of a new tenant moving in like a new employee starting a job. There is an onboarding process.

  • Start with a move-in inspection with the tenant. Have the tenant sign it. This will be gold when the lease is up if there are any issues. You’ll have proof the tenant agreed the unit met their expectations. On the other side, if an issue needs to be resolved, the tenant can fill out a maintenance request, and the entire process is tracked.
  • You can track any tenant onboarding and maintenance expenses for tax purposes and write them off during tax season using the landlord portal.
  • Build a small team of contractors that you can rely on. You will need a handyman and a cleaning crew for maintenance and turnover needs. Having this team in place from the beginning saves you time throughout the lifetime of the rental.

Related:  The perfect tenant move-in package

By taking a small amount of time upfront to set up systems, processes, and automation, being a landlord becomes much easier. While landlords jest that owning rentals are anything but passive income, it can be much more passive with a plan in place.

How many rental properties are too many?

Written by Sarah Block on . Posted in edited, For Landlords, Income Ideas, paid

How many properties are too many?At my high, I had four rental units and, for me, it felt like too many. My husband and I have two full-time jobs, two kids, and too little leisure time. When much of our spare time was focused on our properties and not our kids, we decided it was time to simplify.

But, that’s my personal story. Everyone is different, and where four units felt like too many for our limited time, 22 units might be perfect for you. Real estate investors need to look at three things when deciding how many rental properties to acquire:

1. Personal finance goals

While some may think of real estate investing as a business, you are still using your personal finances to purchase rental properties, keep them in top shape, and cover tenant turnover costs. So, while rental properties are a business, you are funding it. Here are some things to consider when deciding how many rental properties to have in your portfolio.

Debt

How comfortable are you with debt? There are two types of real estate investors. Which investor are you?

Very comfortable: The first type is building a business. Typically, when someone builds a business, they get a business loan and/or find investors. This type of investor feels comfortable with debt and confident that they will pay it off. They will likely feel comfortable taking on more debt to build a bigger portfolio.

Not at all comfortable: The second type of real estate investor is the debt-free journey investor. They build their portfolio as part of a way to meet their financial goals. This investor is less likely to want to take out mortgages and has a goal of paying down the mortgages as fast as possible. They are more likely to pay cash for a property when possible.

Related:  How to Finance a Rental Property

Hefty retirement savings vs. passive income

When buying rental properties, you likely have one of two financial goals in mind: hefty retirement savings or passive income.

Those whose goal is a great retirement income will likely want a larger portfolio. If you accumulate properties in your 30s and pay the minimum mortgage, they will be paid off by the time you retire. You can accumulate more properties because your goal isn’t paying down the mortgage but rather putting money aside for down payments on more properties. This investor sacrifices a larger cash flow month to month to accumulate more properties and have a larger passive income cash flow in their 60s and beyond.

The investor whose goal is passive income now has a smaller portfolio and focuses on clearing the mortgages off their current rental properties. One way these investors handle their profits is to put them straight to the balance of their mortgages. As soon as the properties are paid off all rental income (other than regular expenses) will be passive income that can be used now.

2. Available Time

When deciding how many rental properties to have in your portfolio, consider the time commitment. Real estate investing is called “passive aggressive income” for a reason. It isn’t completely passive. Time is spent working with tenants, making repairs, and finding tenants. It can be quite time-consuming depending on your property and the tenants you have.

Related: Stress-free Property Management with Paula Pant from Afford Anything

Self-managed properties

If you self-manage your properties, consider the time it takes to manage each unit. While Cozy saves massive amounts of time with rent collection, maintenance tickets, and semi-automating the tenant application process, there are still tasks that need to be done. Cleaning, maintaining the property, responding to maintenance tickets, and tenant showings are done by you. Sit down and determine how many hours each unit takes of your time. Do you have that much extra time to dedicate to another property?

Property manager

Do you have a property manager already managing your rental units? Then time isn’t a factor. A property manager can take care of the time commitment needed for your properties. However, the cost of a property manager does need to be considered. Is your property still cash positive when you take into account the cost of the property manager? If yes, it might make sense to add another property to your portfolio.

3. Real Estate Investment Strategy

When deciding whether or not to add more doors to your portfolio, consider your overall investment strategy. The first item to consider is profit. You are in the real estate investing business for one primary reason, and that is to make money. How can you make the most money with the least hassle?

Profit

Your strategy might include more properties that are less expensive or fewer properties that are more expensive with higher rent potential. Neither option is the wrong one. What is wrong is not doing your homework. Calculate the cap rate, do the research, and learn about the communities before investing. Compare what profit you can make with either choice and don’t make assumptions. You might be surprised what heeds the most profits.

Law

Consider any laws that might make life more difficult with more properties. In Illinois for example, if you have 5+ investment properties, you need to hold security deposits in an escrow account, return the deposit within 30 days, or provide detailed receipts within 45 days of move out. Look for landlord-tenant laws in your state, as each state is different.

Conclusion

While four rental units were too many for me, it might be perfect for you. Maybe it is not enough for you. It depends on your financial goals and available time. Look at these factors and decide what makes sense for your situation. There is no such thing as too many rental properties or too little for that matter. There is only what works for you.

Should I raise the rent on a good tenant?

Written by Sarah Block on . Posted in edited, For Landlords, Income Ideas, paid, Rent & Expenses

Every June, my husband and I have the same question: do we raise the rent?

Our leases run August to August, and June is when we begin to consider the pros and cons of raising the rent on our tenants. Sometimes it’s clear. If they paid late or were difficult, we raise the rent. But many of our tenants are amazing, so it’s a difficult decision. Do we risk losing a great tenant by raising the rent?

Here are three questions to ask yourself when deciding whether to raise the rent.

1. What’s the market value of the rental?

I’ve been lucky to have long-term tenants on multiple occasions. All landlords know, finding new tenants is as enjoyable as stepping on a rusty nail. Still, if you haven’t raised the rent in a while, chances are the market value has increased. Is your rental way below comparables? You have a few choices for learning the market value.

  • Property managers—A property manager can compile a comp report to determine the ideal rent price for your rental market. This route isn’t cheap. It’s usually part of hiring an apartment search or property management company and their tenant-finding service. They usually charge a one-month rent fee.
  • Rent Estimate reportSet your rent price with confidence with a Cozy Rent Estimate report. See how your rental stacks up to nearby single-family homes and multifamily properties, with up-to-date info about the actual rents they collect. Each report includes comparable rent prices, local vacancy rates, rental trends, and investor metrics. A report costs $19.99.
  • Do-it-yourself comparables—Before rent estimate platforms existed, I came up with my own by using Apartments.com, Redfin, and Craigslist to look at local apartment listings. I would use their data, rent prices, locations, and time on the market, to determine my market value. It takes time, but not money.

Related: Should I increase rental rates every year?

2. Will the current rent still yield a profit this year?

Rent isn’t the only thing that increases in cost. Taxes go up. Insurance premiums may increase. Upcoming maintenance needs might be expensive. Take all these things into consideration before renewing a lease at the same rent.

Consider these things:

  • What were your costs on the rental the previous year? You should have this information from your taxes.
  • Are any costs expected to go up?
  • Is there any expensive maintenance expected to happen soon?
  • What is your monthly mortgage?

Add up your expenses and subtract from your rent. Will you still make a profit? If so, and the tenant is great, don’t raise the rent. Lucas Hall, the founder of Landlordology, says, “A quality tenant is far greater than a 3% rise in rent.”

Related:  3 ways to stay up-to-date on rental prices

3. Can I raise the rent without losing my tenant?

It is possible to raise the rent on a good tenant without losing them if you do it delicately. If you choose to raise the rent, follow these rules for the best opportunity to keep your great tenants.

  • Raise the rent, but keep it $100 less than comparables, and let your tenant know that while you needed to increase the rent, it is still lower than typical rents for the neighborhood. After receiving the notice that rent will increase, your tenant might begin looking around to see if they are still getting a good deal. However, if you keep the rent below market value, they will find a benefit in staying.
  • Provide plenty of notice. The amount of notice that is required depends on the state. However, the more notice the better. It gives your tenants time to prepare for the cost increase.
  • Be honest and communicate kindly. Remember, your tenants are people. While you are working on determining your finances, they will be doing the same. Be honest and communicate with them. When I raised the rent on a long-term tenant, I provided her with the market report I had and explained to her that the market value was $500 more than I was charging, but I was only planning on raising it $100 because I enjoyed having her as a tenant. Being honest and open about the process I went through in determining the rent went a long way with her, and she stayed for several more years.

In summary

When you’re a landlord, you have to be everything. You’re an accountant. You are a maintenance person. You are marketing. But, most of all, you’re customer service. To keep a great tenant when you need to raise the rent, keep customer service in mind, and make decisions based on data.

Now that I can get my data in Cozy Rent Estimate reports, June will be a lot less agonizing.

PayRent.com