5 ways to collect on a judgment

Written by Laura Agadoni on . Posted in edited, For Landlords, Laws & Regulations, Leases & Legal, paid, Rent & Expenses, Screening

Collecting on a JudgementThe bad news: your tenant left owing you money.

The good news: you just won a money judgment in court against that tenant.

Time to celebrate?

Not really.

Although you’re supposed to get the money your tenant owes you after you win a money judgment, actually getting the money is another matter.

It’s not always easy to collect money on a judgment.

The court’s job ends with the judgment. Collecting on that judgment is on you. Your ex-tenant might pay you immediately, and if so, great. Now it is time to celebrate. But what do you do if they don’t?

Related: How to file a small claims lawsuit against your landlord or renter

1. Ask for it

This simple solution often works. Draft a letter to your ex-tenant requesting the money.

  • Let this person know what they owe you.
  • Tell them if they don’t pay by X date, you will begin a collection process.
  • Mention that if you begin a collection process, the transaction will appear on their credit report.
  • You might wish to remind your ex-tenant that having a collection on their credit report will make it difficult to rent another place or to obtain a mortgage.

Many tenants, not wanting their credit affected, will pay.

2. Garnish wages

Almost every state allows wage garnishment, a process that allows creditors to take up to 25 percent of a debtor’s wages until the debt is paid. You must know where your ex-tenant works to do this. You might have this information on the application your ex-tenant filled out. The rest of the procedure varies by state, but typically, you do the following:

  • Go to your local courthouse and ask for a garnishment order.
  • This goes to your ex-tenant’s employer.
  • The employer then withholds money from your ex-tenant’s paycheck until the debt is paid to you.

3. Garnish bank account

Similar to wage garnishment, you must know something about your ex-tenant—in this case where they bank—and ideally, their bank account number. You might have some bank information on the application your ex-tenant filled out, or you can get the information from a cancelled check. If your tenant paid you by check, then you have it. If not, you might be able to find someone who has received a check by your ex-tenant. You then go to your local courthouse and follow the procedure for garnishing the bank account.

4. Request information from the court

If you don’t know where your ex-tenant works or where they bank, you can request a formal procedure at your local courthouse, usually called a “debtor’s examination.” Your ex-tenant might then be ordered to fill out a form that lists their employer and bank information. Or they may be subpoenaed to appear before the court at a hearing to answer your questions. You will have the opportunity to find out the information you will need to collect money:

  • Where they work
  • The contact information of their employer
  • Where they bank
  • Their bank account number

5. Hire a collection agency

You’ll have to pay to use a collection agency, but recovering some of your money is better than receiving nothing. Unfortunately, the odds of a collection agent being successful in collecting money your tenant owes you are not that good. But you can increase your chances by hiring a recommended and reputable collection agency that specializes in working with landlords. Ask your lawyer, accountant, or other professional you know for a referral.

Related: The problem with collection agencies

The bottom line

Sure, you can collect on a judgment. But there’s no guarantee you’ll be successful or whether it will be worth your time and effort to pursue the money. Only you can make that determination based on how much your tenant owes you and on how busy you are. In most jurisdictions, you have between five and 20 years to collect. So if you’re not up to the job now, or if your ex-tenant has no assets at this time, you might be able to collect your money in the future.

The best course of action is to screen your tenants before renting to them. There’s no guarantee you won’t be burned when you screen tenants, but your chances of renting to a deadbeat tenant are lessened. Keep in mind that the Cozy tenant screening process is free for landlords, and I highly recommend it.

Related: 6 Ways to Find Your Deadbeat Ex-Tenants

Should I allow vaping in my rental property?

Written by Kathy Adams on . Posted in e-cigarettes, edited, For Landlords, Laws & Regulations, Leases & Legal, Maintenance & Renovations, Move-in/Move-out, paid, smokers, smoking, Step 10 - Repair & Maintain, vaping

vapingYou might not allow smoking within your rental units, but what about vaping with e-cigarettes?

About 15 percent of adults under 40 vape, so you might want to allow vaping in your rental property to attract more tenants. But you should learn all you can about e-cigarettes before you do.

Like regular cigarettes and cigars, e-cigarette emissions leave behind a residue that could build up on the walls and floors over time. Even if you decide to allow vaping indoors, it’s worth considering the extra cleanup work that could result when that vaping tenant moves out. So even if your state permits vaping in many public areas, you might want to restrict their use within your rental units.

Cigarettes versus e-cigarettes: the vapors

E-cigarettes: The vapors emitted from an e-cigarette contain far less nicotine than the smoke blown from a regular cigarette.

Cigarettes: Cigarettes leave behind a nicotine-stained film that discolors everything from walls to furniture. And then there’s that stale cigarette stench that’s notoriously hard to remove from a chain-smoker’s home.

Related: How to Remove Cigarette Odor From Your Rental Property

E-cigarettes: The vapors emitted from an e-cigarette contain just a fraction of the amount of nicotine found in cigarette smoke.

Cigarettes: Cigarette smoke contains a laundry list of harmful chemicals such as lead, arsenic, and formaldehyde.

E-cigarettes: Vapors in e-cigarettes typically contain less harmful chemicals, although they’re still packed full of chemicals.

The main difference, when it comes to residue left behind from smoke or vapor, is that cigarette-smoke residue builds up faster and reeks. It’s also visibly noticeable, since nicotine discolors some surfaces.

Even though vaping doesn’t cause nicotine stains, the vapor still creates a messy buildup. One substance in the vapor is vegetable glycerin, which leaves behind an oily residue. Oils attract dust and small particles, so a home exposed to frequent vaping ends up with a dirty, greasy buildup.

Cleaning concerns

Cleaning up after a smoker typically involves steam-cleaning carpets and curtains, washing  non-porous surfaces thoroughly, and repainting the walls. Removing odors could be extremely difficult, depending upon the amount of smoking done indoors.

Cleaning up vaping residue means deep-cleaning carpets, fabrics, and upholstery; washing non-porous surfaces with equal parts water and vinegar; and potentially repainting walls after wiping them down with the vinegar solution. All surfaces could be harder to clean than similar surfaces in a nonsmoker’s unit, thanks to the oily vaping residue.

What about the law?

As is the case with traditional cigarettes, the laws regulating e-cigarettes vary greatly from one region to another.

San Francisco, for instance, bans use of e-cigs wherever traditional cigarettes are banned.

Minneapolis lawmakers, however, believe e-cigarettes do not violate clean-air laws. In Minnesota, landlords decide whether tenants can smoke cigarettes or e-cigs within their units and on-site outdoor spaces. State law prohibits smoking and vaping in common indoor areas of rental properties, however.

Read up on your state’s laws to determine if there’s already a law regulating e-cigarettes and whether that applies to rental housing. If you choose to ban  e-cigarettes and similar electronic vaping products, clearly state this in your rental agreement. Define what forms of smoking and vaping you prohibit. Note any areas where vaping is allowed, such as outdoor spaces far away from rental units. Also clarify any bans on vaping in common indoor and outdoor areas.

Fire hazard is real

Vaping doesn’t carry the same fire hazard as falling asleep with a lit cigarette, but it still has its risks. In an eight-year period ending with the close of 2016, 195 vaping-related fires or explosions were reported in the United States. Many of these incidents happened when the device or spare lithium-ion batteries were in the user’s pocket. Other incidents happened while charging the e-cigarette’s batteries. All of the reported problems related specifically to lithium-ion batteries.

The charging incidents in particular are worth noting, as fires could occur while the tenant is away or asleep. Even so, the number of reported incidents is relatively small, considering that more than 3 percent of all U.S. adults vape, according to 2016 statistics.

Ultimately, it’s up to you whether allowing e-cigarettes is worth the extra cleanup effort or the potential fire hazards. If you decide to allow vaping, it may be worthwhile to note an extra cleaning charge in the rental agreement. Make sure your tenants are well aware of your vaping and smoking rules before renting to them. A questionnaire asking potential tenants about smoking and vaping habits could help protect your property from careless tenants. They’ll be responsible for any excessive repair or cleanup issues that result during or after their tenancy.

Should you offer a deal to find new tenants?

Written by Holly Welles on . Posted in edited, For Landlords, Income Ideas, Maintenance & Renovations, Move-in/Move-out, paid, Rent & Expenses, Rental Advertising, Step 5 - List, Advertise & Show

incentivesWhen your property can’t seem to keep reliable tenants, you might start to consider ways of sweetening the deal, such as offering incentives.

Your property may be great, but that doesn’t mean you’re immune to bouts of bad luck with tenants, increased competition, and environmental nuisances like neighborhood construction projects. When the cards are stacked against you, a discount can help speed up the tenant search and reduce the negative financial effects of vacancies.

The benefit of filling your space may very well be worth the added expense, but make sure you first do a cost-benefit analysis by making sure adding an incentive won’t make your total expenses greater than your total income.

Here are seven practical tips and techniques.

1. Reduce your fees

Review your contract to see if you can be flexible with some of your listed fees. Tenants who review your agreement are likelier to sign on the dotted line if they don’t have to factor an excessive amount of additional costs into their budget. For instance, if you charge for amenities such as laundry or parking, the cost of waiving those fees may be negligible compared to the benefit of winning over a reliable tenant.

If you can manage without the extra income, waive the application fee for background and credit checks. Note that if you use Cozy, applicants are automatically charged for this, but you might apply this charge toward first month’s rent as a way to waive the application fee.

Remember that you’re trying to attract tenants. Applicants have a greater justification for renting with you if they feel like they’re getting a deal they couldn’t find elsewhere. The loss in fee collection is minimal compared to the vacuum of an unoccupied apartment draining your resources.

Of course, make sure that you trust the potential tenant and your screening process before going down this route.

Related: Should I raise the rent on a good tenant?

2. Offer discounted rates

Discounted rates are clearly attractive to potential tenants, but this solution requires some careful math on your end.

Evaluate your expenses and the rates offered by your competition. Compare the costs of offering a monthly reduction against those of an extended vacancy, making sure that your property is still profitable with the deal you offer. Do you have the room to lower your rates if it means signing a tenant more quickly?

You could also offer discounts in return for more convenience. If a tenant can pay rent each month through automatic electronic payments rather than physical checks, for example, you can offer a rent reduction for making your financial life a little easier.

3. Consider a longer or shorter lease

Another way you may discount rates is to offer an extended lease for a lower monthly rate. The longer renters stay with you, the more your risk of extended vacancies is reduced.

The point of an extended lease is to keep your renters making regular contributions to your business. Keep an eye on your local market and any proposed tax changes to assess the risk of settling into a longer-term agreement. While you’ll receive less money for your unit, it may prove more consistent and reliable down the road.

On the other hand, some tenants may not be sure if they’ll be sticking around for a full year. If you need to fill a vacancy now, offering a shorter lease that allows for tenant flexibility may prove beneficial. This is especially true if you’re trying to find a tenant in an off-season. If the shorter lease ends in the summer, for example, you’ll have an easier time finding a more long-term renter.

4. Create more flexible terms

Renting an apartment is an enormous commitment, and a strict lease can turn otherwise excited applicants away. If you relax the terms of your agreement, applicants might feel more secure in deciding to sign with you. And there are small, inexpensive changes you can make to your contract to improve its appeal.

Offer a deal to find new tenants who may be perfectly great renters but crave flexibility that other landlords lack. Pet-friendly apartments are enticing to animal lovers searching for a place that accepts their furry friend. Permission to decorate the property may win some prospective tenants over. Others will find an early lease termination clause appealing, giving them a degree of freedom unavailable from your competitors.

Related: Pet deposits, pet fees and pet rent – what’s the difference?

5. Offer upgrades

If you can’t swing a rate reduction, property upgrades can be a powerful incentive for new tenants. Replacing an old oven with a newer model, painting the walls a more modern color, or increasing storage might win over tenants looking for a fresher living space. Property upgrades create value for you, too, since they will make your rental more attractive for years to come.

Be careful not to overspend on a project that will eat away at your profits. After all, you’re still responsible for all maintenance costs down the line. You don’t need to offer lavish upgrades to appeal to new tenants when simple improvements can make an impact. Something as simple as installing more shelving can please a renter without extending your regular budget for new projects.

Related: 7 Affordable Upgrades for Your Rental Properties

6. Put together a gift basket

For those new tenants who have recently signed a lease, welcoming them to your building with a gift basket can be a great first step toward building a friendship. Renters who feel a closer connection with their landlord are more likely to renew their contract once it expires.

It doesn’t have to cost a lot to look like a nice gesture. Gift cards to local restaurants or the movie theatre, food, or a bottle of wine are all possible options when stocking your gift basket. An edible arrangement can make a good impression on your tenants.

7. Provide a free first month

At first glance, it seems like a ridiculous ask of any landlord. Who in their right mind would sacrifice an entire month’s rent? But consider the money lost on an already vacant unit that’s accruing nothing but dust, and a month of waived rent is well worth the income that will begin to flow in afterward.

Related: 3 reasons you might not want to collect a security deposit

When does offering a deal become a gimmick?

Some potential renters are wary of deals, seeing them as “gimmicks” that a landlord uses to attract the naive and gullible. After all, if the landlord has to offer a deal to find new tenants who will stick around, they might think the property suffers from an issue not explicitly advertised.

This is particularly relevant to No. 5 above. Densely crowded urban areas with high rent prices often have apartments that advertise a free month’s rent in exchange for signing a lease. While this isn’t misleading, these concessions can lead tenants to enter an agreement they’re unable to manage.

As a landlord, you need to fill your rentals. The fortunate news is that there are many ways to accomplish this task. As long as you do it with respect and fairness to everyone involved, you’re well on your way toward managing a happy, busy property.

What to do if the deposit doesn’t cover the damage or unpaid rent

Written by Laura Agadoni on . Posted in edited, For Landlords, Laws & Regulations, Leases & Legal, Move-in/Move-out, paid, Rent & Expenses, Screening, Security Deposits, Step 13 - Return Deposit

You did the right thing in collecting a security deposit. But what happens when that deposit isn’t enough to cover damages or unpaid rent?

Most landlords collect a security deposit equal to one month’s rent at move-in time to cover any damages or unpaid rent at move-out time. But if there were extensive damages to the property or if the tenant left without paying last month’s rent and there were damages, you’re out some money, and that isn’t right.

You have options, though. Let’s explore them.

1. Communicate with your tenant

To legally withhold the security deposit, you must, in most states, send a letter to your tenant explaining why you are holding some or all the deposit. And you must do so within the time limit specified by your state. You can find your state law here.

Here’s a template for documenting and itemizing deductions from the security deposit.

Send this document or one like it to your tenant to let them know why you are withholding some or all the security deposit.

If they still owe you money beyond the security deposit, you’ll also need to send a demand letter.

2. Send a demand letter

Along with sending the itemized list, you need to send a letter asking for what your tenant owes you, called a “demand letter.”

Here’s a sample of a demand letter you can send a tenant who owes you money.

3. Decide whether you should go to small claims court

You might receive the money owed to you after sending the demand letter. But if you don’t, send the letter a second time, attaching the first letter along with the second. If you still get nothing, you need to assess whether it’s worth your time and effort to take your tenant to small claims court.

Related: How to file a small claims lawsuit against your landlord or renter

The upside of going to small claims court is that you’ll likely win a judgment against your tenant if you can prove to the judge that your tenant does, indeed, owe you money. You get your money (theoretically anyway: see about being broke below), and you get satisfaction in that you were not taken advantage of.

But there are downsides to small claims court as well.

It’s time-consuming.

You need to prepare your case, organize the evidence, learn how to go to small claims court, and attend the hearing in the town in which your rental property is located.

Your tenant might be broke.

If you win a judgment, you still need to collect on that judgment. If your tenant has no money and no job, you won’t be able to collect.

You might not have the evidence.

If you didn’t keep proof, such as how your property looked at move-in time compared with how it looked when your tenant left, you might not be able to win in small claims court.

You pay filing fees and might lose pay by taking time off work.

Filing fees are usually less than $100 and you get them back if you win your case, but if you don’t have a strong case and lose, you need to be prepared to lose your filing fee. And depending on how valuable your time is, if you need to take the day off from work, you need to factor that cost in as well.

Your tenant could file a countersuit.

Whether your tenant has a case against you or not, they could file a countersuit. If you haven’t done everything by the book, you actually might go home owing your tenant money.

But if you can say “yes” to the following, you should seriously consider going to small claims court:

  • Your tenant owes you a significant sum of money.
  • You have proof of what you are owed.
  • Your ex-tenant has a job or a source of income.
  • You have the time and energy for small claims court.

If you don’t think you’ll get much or any money, you might want to write this off as a loss and move on.

Try to prevent excessive damages in the first place

It’s good to know what to do if you’re owed money, but it’s even better to prevent this situation from happening in the first place. Here are three measures to take to help avoid being out any money.

1. Conduct regular inspections

One way to help prevent excessive damage to your rental property is to perform periodic inspections. It’s important to strike the right balance between keeping tabs on what’s going on with your rental property and not becoming intrusive to your tenants. It’s typical to inspect your property at least once a year. Some landlords do this twice a year or even quarterly.

Related: How Often Can a Landlord Inspect a Rental Property?

If you notice a problem, such as a tenant sneaking in a pet or an extra tenant or two, or if you notice a dying lawn or a water stain on the ceiling, you can nip the problem in the bud before a small issue becomes an expensive problem.

2. Have a walk-through a month before move-out

The time to do a walk-through is when the tenant is moving out or immediately after they move out. (You do that, right?) A walk-through lets you know whether you will need to withhold any of the security deposit.

But you can also do a walk-through about a month before your tenant moves out. At that time, you can go over with your tenant any items that need fixing. By doing the walk-through a month in advance, you give your tenant a chance to fix any problems so they can get all or most of their deposit back.

3. Screen tenants

A great way to help ensure you don’t lose money is to get good tenants in your property in the first place. And the way to do that is by tenant screening. Of course, screening doesn’t guarantee a perfect landlord/tenant relationship, but it helps immensely.

I use Cozy to screen tenants. I require a background and credit check on all applicants. The applicants pay directly to Cozy for this service, and I receive the information to review, which helps me decide whom to rent my properties to.

Bottom line

Making repairs because of damages tenants cause and being out rent for a month or more from a tenant who stiffed you are risks landlords take. Knowing what to do if this happens to you and helping prevent this from happening in the first place lessens your risk of losing money.

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 attract long-term tenants

Written by Holly Welles on . Posted in edited, For Landlords, Landlord Tips, long-term rental, Maintenance & Renovations, Move-in/Move-out, paid, renters rights, Step 5 - List, Advertise & Show

Fresh out of college with the intention to move from my hometown to a new city, I was searching for an apartment. And when I finally found the listing of my dreams—okay, a listing I could afford—I first had to make sure the landlord was someone I trusted to respect my living situation as much as I respected their property.

For a young renter, meeting with a new landlord can be intimidating. I was nervous about apartment hunting on my own, but even more nervous about failing to see eye-to-eye with my potential landlord.

Fortunately, from our first meeting, my landlord made it clear that my interests were as important as his business. I live in a small building with my landlord residing on the first floor, which makes a healthy rental relationship crucial. Happily, my landlord has a great attitude that has attracted and kept multiple long-term tenants.

I’ve renewed my lease since that first year and have every intention of doing so until my living needs change. How did my landlord inspire this, and how can you take his lead? From moving in to living in harmony, here’s how you can inspire long-term rental relationships with tenants.

1. Consider a compromise

The day I signed my lease, the landlord was showing the listing to two other potential tenants. I had lined up a few viewings and was hesitant to jump on signing without finding out my options. Rather than pressure me to grab the listing while I could, my landlord granted me a grace period—he would not lease the space that day without hearing from me first.

I appreciated that this potential landlord was willing to work with me. His gesture showed me that he valued me as a potential tenant and was understanding of my situation.

If you want to make a good first impression on your tenants, laying the foundation to build a long-term relationship, making even a small gesture can do the trick. A flexible policy can go a long way.

2. Offer a warm welcome

When I moved in, my landlord provided me with a list of his favorite community hotspots and a few restaurant recommendations. His friendliness alleviated all my earlier anxieties about living in a new space, and he established himself as a go-to contact for questions about our neighborhood.

If you want to start off on the right foot, a small welcome gift or some cultivated advice can go a long way. It doesn’t have to cost a lot, but a welcome package is a kind gesture that shows you care. Besides free advice, here are some inexpensive items you might want to include:

  • Coffee beans
  • Baked goods
  • Cleaning supplies
  • Map of the area
  • Coupon or gift card for a local favorite
  • Your contact info on a notecard

Note that if you provide consumables, make sure your tenant is aware of the ingredients.

Welcoming your tenant opens a line of communication early on, encouraging your tenant to call you in case something happens. A welcome package is a perfect first step.

Related: Provide Bathroom Essentials on Move-In Day

3. Maintain the “little” things

Neglect can drive a wedge in your rental relationships, particularly if the tenant believes you don’t care for their comfort. Landlords should respond to maintenance requests as soon as possible, and this can include more than apartment maintenance.

Parking was an issue during my first week of moving in because I struggled to perfectly maneuver into my tight space. When I mentioned it to my landlord, he guided me into the spot. He even sent me an appreciative text once when he noticed I had parallel parked like a pro. He took time out of his day for this small act, and I felt appreciative.

Related: Be an ethical landlord

4. Make the area safe

With today’s technology, installing security measures in your complex is simpler than ever.

Browse through the broad selection of modern tech and determine which cameras and locks are most suitable for your building. If you make the adjustments to your property, brief your tenants on new procedures and protocol. You can send out an email or place notes on the doors, but make sure to keep them informed.

My landlord has never compromised in this area. Between a security camera by my parking space and his diligence in maintaining my exterior locks, I feel secure living alone as a young woman. His respect for my security contributes to my decision to renew my lease each year.

Related: Should Landlords (or Tenants) Install an Alarm System?

5. Show respect for privacy

I never have to worry about surprise inspections. That’s not a healthy way to approach the landlord-tenant dynamic, not to mention that the practice is illegal in most jurisdictions. Though you own the property, you should show some tact when navigating a renter’s space.

If you’re planning to enter a tenant’s unit for whatever reason other than an emergency, let them know in advance. Schedule a date and time that won’t inconvenience them, and try your best not to break from it. They should feel happy to see you, not horrified at the prospect you might appear at any given moment for an impromptu check.

In this area, like many others, your relationship rests on your ability to communicate. Maintain a regular back-and-forth where you discuss these things. Tenants deserve privacy, so it’s essential you give them their personal space.

Related: Can a Landlord Enter the Property Whenever They Want?

Building long-term rental relationships

My concerns about navigating my new rental relationship were swept away by the respect my landlord has shown for both the apartment I leased and my living situation. None of his actions take much time or money, but they add up. Not only am I more likely to continue this long-term rental relationship, but I’m also encouraged to do everything I can to make my landlord’s life easier as well.

Your tenants can share my positivity. Start with a small gesture, and go from there.

The problem with collection agencies

Written by Laura Agadoni on . Posted in edited, For Landlords, Laws & Regulations, Leases & Legal, paid

There needs to be methods for creditors to collect debt owed them. Otherwise, they run the risk of going out of business.

As a landlord, you are a creditor. If your tenant skips out without paying rent, or if they damage your place more than what the security deposit covers, you need to be able to recover your money.

One way to try to get your money is to use a collection agency. Doing so might work for you, but you should first understand the process and what it entails before you go down this path.

Why?

Because there are problems associated with collection agencies.

1. Collection agencies don’t collect

The odds of a collection agency actually collecting the debt they are going after are not good.

Estimates vary in just how successful collection agencies are. A generous estimate is 20 percent, meaning that there is an 80 percent chance that a collection agency won’t be able to collect delinquent debt for you. And some estimates are as low as an industry-wide 11 percent success rate. That’s pretty dismal.

To make matters worse, the success rate for collections is down from decades past, when the collection rate averaged 30 percent. So not only are your odds of getting your money low when you use a collection agency, the odds are getting worse as time goes on.

2. Collection agencies are expensive

Ideally, as a landlord, you should get all the money your tenant owes you for back rent, damages, and late fees (that were specified in the lease).

The best way of doing that is to handle the collection process yourself, typically by sending a demand letter, calling your tenant, or by starting the eviction process. You might not have the time, however, to track down your tenant, or you might have tried but were unsuccessful.

Related:

Getting some of the money you’re owed is better than getting nothing. So if you can’t collect on your own, you might consider a collection agency. You’ll pay either a flat rate or a percentage of what the agent collects.

You’ll probably pay less by paying a flat rate, but see No. 1 above—the odds are not good that the agency will be successful in collecting the money your tenant owes you. If you pay a flat fee, you potentially are out even more money. If you pay a percentage of the collection, expect to pay between 25 percent and 60 percent of the collected debt to the collection agency.

3. Collection agents can be shady

Some collection agencies allow their agents to use unlawful tactics to try to collect debt. You might have heard stories about aggressive collection agents who harass people for money they don’t owe, threaten jail to debtors, or who call employers and put people’s jobs in jeopardy. None of that is legal.

Not only is it wrong to subject people to unlawful collection tactics (even people who owe you money), it gives you a bad reputation by associating with unscrupulous people. You might even find yourself being sued.

Fair Debt Collection Practices Act

Collection agencies must comply with federal law, specifically the Fair Debt Collection Practices Act (FDCPA). Ask agencies you’re considering using if they comply with FDCPA regulations. Under the Act, agencies must adhere to the following:

  • No calls to debtors before 8 a.m. or after 9 p.m.
  • No calls at work if the debtor requests that.
  • Collector must stop contact if the debtor requests so in writing.
  • No contacting friends and family more than once. And the one contact can only be to get contact information, not to inform friends and family about the debt.
  • Agent must provide proof of the debt to the debtor.
  • Debtors cannot be threatened with harm.
  • Agent cannot threaten to take legal action unless they actually can and will.
  • Collector cannot lie about who they are.
  • Collector cannot send fake legal documents to trick the debtor.

Unless you check out the firm you are hiring and find out the tactics they use to collect, you could be contributing to the problem.

Finding a good agency

Many collection agencies are reputable and play by the rules.

Here are some ways of finding a good agency:

  1. Ask for referrals from trusted professionals you know, such as your lawyer or accountant.
  2. See whether the agency you are considering is a member of ACA International, The Association of Credit and Collection Professionals, the leading trade organization for the industry.
  3. Look online for complaints against an agency you’re considering.
  4. Make sure the agency is licensed.

Bottom line

Using a collection agency could work for you, but be prepared for disappointment. You’ll have a better chance of collecting your money if you hire a collection agency that specializes in collecting rent from tenants. Also, the younger the debt the more likely it will be to collect. Provide the agency with your lease, what the tenant owes, and all attempts you have made to try to recover the money yourself.

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.

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