Can I get more money from a furnished rental?

Written by Laura Agadoni on . Posted in edited, For Landlords, Income Ideas, Laws & Regulations, paid, Rent & Expenses, Rental Advertising, Security Deposits

Furnished RentalsAn interview with Lucas Hall, Landlordology’s founder and head of industry relations at Cozy.

Not only can you get more money from a furnished rental, demand is growing in the furnished rental market, even with the popularity of Airbnb. Over the past decade, there have been more renters overall, and a percentage of those renters prefer to rent a furnished home for a variety of reasons.

I recently spoke with Lucas to get his opinion on what it takes to get into the furnished rental business and to get his best advice for landlords who are thinking about breaking into this niche segment of “landlording.”

First, lets talk about what exactly a furnished rental is.

There are two types of furnished rentals: long-term, meaning a few months or more, and short-term, such as vacation properties.

Most long-term rental properties typically don’t come furnished. But they can. And there are some benefits for renters. Furnished rentals usually have all the furniture and appliances someone would need, and they may or may not have day-to-day essentials such as plates, silverware, and linens.

Short-term rentals for 30 days or fewer are completely furnished with linens, a vacuum cleaner, grill—everything you can want. The idea is that all you do is bring your suitcase and move in.

What kind of furniture should you put in a furnished rental? Cheap motel furniture? High-end stuff?

The type and quality of furniture to buy should mirror the type of unit you have. So if you have a high-end unit that commands thousands of dollars a month, then you should probably have a leather couch, a nice bed frame, and art on the walls. Whereas if you have housing that attracts contract workers, for example, who make between $20,000 and $40,000 a year, you can have used furniture that’s still in great shape. Or you can get furniture from places like IKEA.

In other words, if your clientele is willing to pay $3,000 a month for a two-bedroom, that’s the clientele who would expect to have a nice sofa.

Another consideration is that if you buy the nicest furnishings, there is a chance things will get stolen. If you buy the best coffeemaker or the most expensive knives, those items might ‘disappear.’ You’re better off buying middle-of-the-road items that serve their function.

What is the market for a furnished rental? Who wants to stay in one?

I have had renters for long-term furnished rentals who are moving from across the country for a job, and it’s a big convenience to just be able to move right in. There’s no need to move furniture or to shop for furniture right away.

Short-term is a whole different game. There you have weekly or monthly vacation rentals. You also have traveling nurses who tend to stay for two to six months, and the hospital pays for it.

Related: How to market your rental to traveling nurses

How do you market a furnished rental? What, if any, are the differences in your advertisement?

It’s important to put in the title that you have a furnished rental. Someone who needs furnished housing will be looking for that first. An unfurnished rental in this case will be a deal breaker. Also describe in the listing what the furnishings are. And make sure you show pictures of all the furnishings.

An important benefit of a furnished rental is that furnished units generally look better in listing photos, particularly when you stage properly. You want your furnishings to look really good in pictures. Your furnishings should be clean, useful, and complement the space and the color scheme.

Whenever you’re advertising a property, whether it’s a long-term unfurnished rental or a short-term furnished rental, you should photograph it with furniture in it.

Related: How to shoot real estate photos like a pro

How much does it typically cost to furnish a rental property?

I have had experience furnishing a two-bedroom condo and a studio. For the studio, I spent between $2,000 and $3,000. With the two-bedroom, I spent about $10,000 to furnish it. I bought a little nicer for the two-bedroom because it was going to be a short-term rental. I needed durable furnishings.

My tip when it comes to buying furnishings, whether it’s for a short- or long-term rental, is to buy stain-resistant materials. Otherwise, you’re stuck with regular cleanings or having to replace the furniture every year.

Now for the question that helps landlords decide whether they will offer a furnished rental or not:

How much more money can you get for a furnished rental?

You can typically get 15 to 20 percent more for a furnished long-term rental. It’s a convenience. People are willing to pay for convenience.

And for a furnished short-term rental, you can get 40 to 50 percent more at a minimum. In some cases, you can even double that, getting 100 percent more, depending on the location of the property.

You can typically get 15 to 20 percent more for a furnished long-term rental. It’s a convenience. People are willing to pay for convenience.

Which locations are best for furnished rentals?

I’ve had the most success with furnished rentals in high-density or highly desirable areas. I’ve had a successful furnished studio, for example, right in the heart of Washington, D.C., right near Capitol Hill and a metro station. People wanted to live there and were willing to pay for the convenience of a furnished rental. Places like that appeal to people whose time is more important than money and who would rather spend more than deal with furnishing a rental property.

Can you charge a larger security deposit for a furnished rental? After all, there are now theft of furnishings and furniture damage to consider.

Absolutely. But you can charge only what your state allows. This is often between one and two months’ rent as a maximum. So most of the time, landlords charge one month’s rent as a security deposit for an unfurnished rental. But for a furnished rental, I think it’s smart to double that, or charge two months’ rent. And just like any security deposit, it’s fully refundable as long as there are no damages.

Do you have any further tips or advice for our readers?

A good opportunity for people who want to do long-term furnished rentals is to get into corporate housing or provide housing for traveling nurses. You figure out if there’s a company or hospital that’s willing to make a corporate agreement with you. They pay the rent and are responsible for finding tenants.

Are you interested in getting into the furnished rental business? Or are you in it now? Let us know in the comments!

Standard questions to ask on a rental application

Written by Kathy Adams on . Posted in edited, For Landlords, paid, rental application, Screening, Step 6 - Applications & Screening

Questions to ask in a rental applicationIf you’re new to the rental business, setting up something even as basic as a rental application may seem a bit daunting.

Cozy makes the process easy, offering a secure online application link for each applicant and co-applicant. Whether you choose to use Cozy for your applications or opt for your own homemade version, these standard questions help you make informed decisions about potential new renters.

1. Personal information

Getting personal information is an absolute must on every rental application; after all, you need a way to contact the applicant and verify a few basic details. In this section, the applicant fills out their name, contact information, and date of birth. A Social Security number is not required.

Related: Do Landlords Need to Collect Social Security Numbers?

2. Employment and income history

This section asks for the applicant’s employment status and several years of work history. Ask for the current (and recent) employer’s name, the applicant’s start date, title, and monthly pre-tax income. Also ask for a work contact to verify employment. Include space for additional income information. This comes in handy for the self-employed or for those with other income sources or side jobs.

3. Residence history

Ask the applicant to include residence history for at least the past two years, including the current home. For each location, the applicant should list the approximate move-in and move-out dates. Also ask for the landlord’s name and contact information.

4. References

A reference section helps you verify that what the applicant claims is true. Ask for at least two references, such as coworkers, former landlords, college professors, or former bosses.

5. Emergency contact

This information isn’t necessary to rent an apartment, but it could be vital in the event of an emergency later on. Here, the applicant lists the contact information for a nearby family member or close friend.

5. Pets

The pet section lets the applicant list any pets they plan to bring into the rental. If your rental allows only small dogs, for instance, include extra space to list a dog’s breed or size. Use this section to inform applicants of pet-specific rules at your rental, too.

6. Bankruptcy

Though not a requirement, you may wish to ask whether the applicant has filed for bankruptcy in the past seven years. Include space for an explanation below the question in the event the applicant indicates a bankruptcy. Note that bankruptcies show up on a credit report for up to 10 years.

6. Evictions and refusal to pay rent

These questions are optional. Asking the applicant whether they’ve ever been evicted or refused to pay rent can help screen potential problem tenants. If they indicate “yes” to the eviction question, ask why it happened. Refusing to pay rent or refusing to pay on time is also worth an explanation. Typically, rent refusal happens during a landlord/tenant dispute, so it’s good to know the tenant’s history in this area. Several rent refusals could indicate a potential for future disputes.

7. Crimes

In this section, the applicant indicates convictions for felonies or misdemeanors, including drug-related convictions. Parking and traffic violation information isn’t necessary here. This information will show up on a background check.

8. Smoking

Ask about smoking. This is also a good place to list the smoking policy for your property or region. If your property has a designated smoking area, mention it here as well.

Related: How to Remove Cigarette Odor from Your Rental Property

Additional screening information

It’s a good idea to require applicants to undergo further screening, such as credit reports and background checks. Note that the Cozy application covers these as well. With Cozy, applicants click links to purchase either report, with an option to refuse either one. If an applicant refuses, they are offered space to explain the refusal.

The bottom line

Getting the same information on all your applicants makes the process fair and helps you compare applicants. Have requirements set up ahead of time, such as a certain credit score, income level, and debt load, and then when you review applications, you’ll be able to offer your rental to the most qualified applicant.

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.

4 reasons you should not use a real estate agent to rent a house

Written by Laura Agadoni on . Posted in edited, For Renters, Move-in/Move-out, paid, Rent & Expenses, Rental Advertising, Step 5 - List, Advertise & Show

Don't work with an agentCall me crazy, but I get a little annoyed when real estate agents call me about a rental listing.

Why?

Here’s a typical conversation:

Me: Hello.

Agent: Hello, this is John. I’m a real estate agent with AAA Real Estate. Is the home for rent at 123 Main Street still available?

Me: Yes it is.

Agent: Well, it’s not in the MLS.

Me: A silent pause

Agent: Anyway, my client requested to see it. And I want to show it now.

Me: I’m having an open house Saturday at 3 p.m., and your client is welcome to come.

Agent: No, that doesn’t work. My client wants to see it sooner. When can I show it?

Me: You can’t show it at all. Tenants are currently living there, and I’ve made arrangements to have an open house Saturday at 3. Please invite your client to come then.

Agent: Do you pay an agent commission?

Me: No.

Agent: Thank you. Goodbye.

And I never hear from this agent or their client again.

Here are four reasons why you shouldn’t use an agent when you want to rent a home:

1. Real estate agents use only the MLS

If you ask a real estate agent to find you a rental property, they will most likely look only on the Multiple Listing Service (MLS), which only agents can access.

In fact, I asked an agent the other day how he finds rental properties for clients. He said he finds them through the MLS.

Here’s the problem of looking only at the MLS for rental properties: Since only agents can list properties through the MLS, real estate agents are missing all the properties landlords like me advertise. And if your real estate agent is missing out on properties listed by non-agents, you are too.

You are better off, when looking for a rental property, to look online.

You’ll probably find lots of rental homes by looking at various real estate sites on your own, more than what your real estate agent will find by using only the MLS. Of course, you can always find properties and send them to your agent, but then why not just contact the person on the listing yourself?

Related: The Only 3 Websites You Need to List a Rental Property

2. Agents expect to be paid

Real estate agents mainly work with clients who are buying and selling homes. In those cases, the seller typically pays the real estate agent by giving the agent a percentage of the home’s selling price.

So the expectations for most real estate agents who are helping a client trying to rent is that the landlord will pay the agent for finding a tenant, typically one month’s rent (similar to getting a cut of a home’s sale).

But in a rental market where most applicants find rental properties without an agent, landlords have no reason to pay an agent. In other words, if I have five applicants for a property, four who represent themselves and one who comes with an agent who expects me to pay them a month’s rent, guess who I’m not renting to?

If you use an agent in a market where most people are finding properties on their own, you will likely be taking yourself out of the running to land a rental property.

3. Agents don’t really want to work with you

I’ve always suspected that statement to be true, and now I have a couple of stories to back this up. I think this probably represents what many agents think.

A real estate agent called me the other day on behalf of her client, and when I told her I don’t pay an agent commission, she let me know that she doesn’t know what to tell renters who call her for help. She wants to help them find a home, but if the landlord won’t pay her commission, she is not interested in working for free.

Another agent told me that he usually doesn’t work with clients looking to rent but that he will sometimes do so to help a friend out.

Since it’s not the norm for homebuyers to pay an agent (home sellers typically do), renters and agents expect the landlord or property owner to pay the agent just as home sellers (owners) do. But while most home sellers use and pay real estate agents, most small-time property owners do not use agents to get their property rented, so they have no interest in paying your agent.

If you really want to use a real estate agent to help you find a rental home, you might want to consider paying your agent yourself.

4. Agents often do more harm than good

Landlords who know their business find out what market rents are for similar rentals in their area. (I use the Cozy rent estimate tool in addition to keeping up with rent prices in my area.)

But when a real estate agent comes along, they are usually loaded for bear and ready to negotiate rent price—it’s just part of their job, like offering less than asking price for a home to buy. Although that’s standard practice for the home buying process, it’s not typical for landlords like me who plan to rent the property for the price listed.

Just as I don’t pay agents a commission, I am not interested in taking less than my advertised rate for my rental properties. If you’re paying an agent for their great negotiating skills, your money is largely being wasted when it comes to renting versus buying a property.

When real estate agents are helpful

There’s a place for real estate agents and rental properties. In big cities like San Francisco or New York where it’s difficult to find housing, you might benefit from using an agent. Or if you are relocating and know nothing about the area, you might need help from an agent who can show you around. Other than that, you are typically better off to cut out the middleman and find a rental house yourself.

A biyearly maintenance schedule for busy landlords

Written by Chris Deziel on . Posted in edited, For Landlords, landlord, Maintenance & Renovations, maintenance schedule, paid, rental maintenance, Step 10 - Repair & Maintain

If you own rental properties, you know that each one needs a maintenance schedule. You have a couple of alternatives if you don’t want to pay a property manager or maintenance service.

  1. Create maintenance agreements with tenants.
  2. Find a way of working a rental maintenance schedule into your routine.

Related: 5 Ways to Save Money by Being Your Own Property Manager

The first alternative is a great idea if you have responsible, long-term renters. But it might not be such a good one if you have a high turnaround rate or unreliable renters.

If you find the buck stopping at your desk, and your lifestyle won’t accommodate a monthly maintenance schedule, don’t despair. You should be able to take care of most major maintenance issues with biyearly visits, preferably in mid- to late-fall and mid-spring.

Fall maintenance

When you visit your rental property in the fall, your goal is to get it ready for winter. Make sure the heating system is in good working order, and inspect the structure for any problems that could be exacerbated in cold and snowy weather.

1. Service the central air system

Fall is the best time to clean and/or replace all the air return filters as well as the filters around the heating unit itself. If the property has a wood stove or fireplace, it’s a good idea to get the chimney swept once a year. This keeps the fires burning brightly and prevents sparks from causing fires in places you don’t want them.

Related: Who’s Responsible for Furnace and HVAC Maintenance?

2. Clean the gutters

Prevent ice dams and icicles by clearing leaves and debris from the gutters. It’s a messy and slightly dangerous job, so you may want to hire a handyman to do this for you.

3. Winterize the garden

Shut down the sprinkler system and then drain it to prevent burst pipes. Mulch vulnerable plants to protect them from frost. You can make great mulch material by raking leaves onto the lawn, mowing the grass, and collecting the cuttings.

4. Check weatherstripping and patch holes

Replace worn weatherstripping on doors and windows, and check around the foundation for cracks and holes. Patch the holes with caulk. If they look inviting for rodents, cover them with galvanized flashing so the renters don’t have a winter pest problem.

5. Do a safety inspection

  • Look for rotted wood, lifting or sinking concrete pads, or anything else that could be a slipping hazard when covered with snow or ice.
  • Check handrails for stability.
  • Check outdoor outlets and light fixtures to make sure they work and that they are waterproof.

Related: Top 10 fall maintenance tips for landlords and property managers

Spring maintenance

Spring maintenance is mostly about troubleshooting damage caused by ice, snow, and freezing temperatures. Because the ground has thawed and the sun is out, it’s also the best time to make improvements that enhance the appearance and habitability of the property.

1. Maintain Drainage

Clear blocked downspouts and gutters, and repair leaks. Look for standing water in the yard or driveway, and improve drainage so puddles don’t turn into floodwaters during summer rainstorms.

2. Look for plumbing leaks and repair them

All pipes are vulnerable to freezing in the winter but especially exterior pipes that are partially or completely exposed. Turn on the water to full pressure, and check all the joints for sweating or active leaks.

3. Stabilize fences, decks, and handrails

Exterior wooden structures take a beating during the winter. Replace rotted wood, and tighten bolts and nuts to keep them serviceable throughout the summer.

4. Power wash

Clean dirty walkways, decks, fences, and sidings to keep them mold-free and looking their best.

5. Test the smoke alarms

Press the test button on each smoke alarm to be sure the alarm sounds. Check the dates on the batteries and replace any that have been in place longer than 10 years.

6. Seal cracks and holes

You did this in the fall, but you should also do it in the spring. Rodent and insect activity are highest in the summer months, and sealing them out is the best way to prevent an infestation.

7. Test the cooling system

If your rental has an air conditioner, make sure that it comes on and blows cold air.

Adding pool and septic upkeep

Some maintenance tasks are property-specific. For example, not every property has a pool or septic system, but if yours does, you need to regularly maintain them.

For pools

Closing a pool in the winter and opening it in the spring are two important jobs. Most landlords contract with a pool service for regular pool upkeep.

Related: A Landlord’s Guide to Swimming Pool Maintenance and Liability

For septic systems

Check the level of the tank in the spring, and pump it if necessary. This is something you should do every three to five years. Don’t let your tenants off the hook when it comes to septic maintenance, however. The way they use the plumbing affects the health of the tank and drain field. Give your tenants clear guidelines concerning septic use when they move in. It goes without saying that tenants should also do their part to dispose of trash and maintain sanitary, mold-free conditions.

Related: How to Educate Your Tenants about Using a Septic System

What to do when your tenant is locked out… again

Written by Kathy Adams on . Posted in edited, For Landlords, key replacement, keys, locked out, locks, Move-in/Move-out, paid

Locked out againIt’s happening again: one of your tenants is locked out and calls you late at night to let him into his rental unit.

Accidents happen. I’ve left my hotel key-card in my room plenty of times. But it could be a major annoyance if the same tenant repeatedly gets locked out.

If you don’t mind being on-call 24/7 to deal with every Mr. and Ms. Forgetful you rent to, don’t worry about it. But if you appreciate peace of mind and wish your tenants would learn to be more responsible, there’s a few things you can do to deal with those lost-key situations.

Add a lost-key clause to the contract

By adding a simple sentence or two to your lease, you could charge for a lost key. Include details such as a minor charge for key replacement or for your time traveling to the rental after business hours. You may want to add a clause charging the tenant for locksmith services if you are unavailable and don’t have another means of getting the tenant back into their rental.

While you’re at it, make sure your rental agreement details how many keys each tenant receives upon renting. The contract should also state whether the tenant is allowed to make key copies. Note that if you generally change or re-key the locks between tenants, allowing copies could help prevent lockouts.

Related: Lock Lock, Who’s There? The Rules for Changing Locks

Change the locks

If your tenant locks their keys inside the rental, that’s one thing; outright losing the keys more than once is another. There’s no telling where those lost keys are or who may have access to the building after finding them. In that case, changing the locks makes sense.

Note in the rental agreement that the tenant will be responsible for the full cost of replacing the locks if they lose the keys. This is a potential security issue.

Install “smart” locks

Every time a tenant makes a key copy or loses one of their keys, there’s a chance a nonresident has easy access to that rental unit. Kwikset SmartKey locks eliminate a lot of stress, allowing you to re-key the locks without a locksmith. Make sure you still have a key that opens the lock, or you won’t be able to re-key it.

Related: Re-key the Locks Between Tenants with Kwikset SmartKey

Go keyless

An electronic keypad system is the perfect alternative to dealing with forgetful tenants. Back when I was a renter, my landlord allowed me to choose an access code for the entry door keypad. It was quite nice knowing I could go for a bike ride or jog without carrying keys.

As a landlord, the keypad system is even more beneficial: no more replacing or re-keying locks between tenants. Even better: no more lost-key phone calls. Electronic keypads are battery powered, so the battery needs to be replaced once a year or so. Basic electronic keypads don’t require internet access or a “smart” home system, so there’s no Wi-Fi required. Keypads fit many types of doors.

Ultimately, re-keyable locks and keypad systems help prevent lost-key syndrome, which means more peace of mind for you and your tenants in the long run.

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 you let tenants make improvements?

Written by Laura Agadoni on . Posted in edited, For Landlords, For Renters, Maintenance & Renovations, paid, Step 10 - Repair & Maintain

You have a house that’s, to put it mildly, ugly.

The front porch sags, the exterior paint is peeling, the carpets are stained and worn, and the circa-1960 bathrooms have never been updated. But you have renters anyway, and they want to make improvements. Should you let them?

That’s almost exactly what happened in one Pennsylvania home. It turned out badly for the landlord who gave the month-to-month tenants a notice to vacate … after all the renovation work was complete. The court made the landlord pay more than $11,000 to reimburse the tenants for the improvements they made.

So the question remains: should you let tenants make improvements?

The answer: it depends.

Your tenant asks

Tenants often ask to make improvements to a home they will rent. They need to live there, after all. Common requests are to paint the walls, drill holes to hang window treatments or run cable, replace the flooring, update the light fixtures, create a garden in the backyard, and change the bathroom sinks.

Related: Should I allow my tenants to paint a rental property?

What you should do when your tenant asks to “improve” the home is to calculate how much it will cost to return the unit back to its original condition if need be. That might be necessary if the tenant’s so-called improvements make your rental less desirable. But, on the other hand, the alteration might very well be an improvement you can leave. And that will be a benefit for you and will make your current (and probably future) tenant happy.

If the security deposit will cover fixing the alteration, you might consider taking the risk and say, “Yes.” If the security deposit won’t cover the cost to return the property to its original state, or if you just don’t like the idea of what your tenant proposes, you can—to use Nancy Reagan’s famous line: “Just say no.” This is your investment we’re talking about.

But who pays?

If your tenant makes an “improvement” that devalues your home, and if they did so without your permission, they typically need to pay, and you would use that money to fix the issue. But if your tenant adds value to your house, like the Pennsylvania example above, the situation regarding who pays becomes more difficult.

One option is that you strike a deal where you pay half and they pay half. Another is that you might allow an improvement but only if they pay for all of it. Or you might decide the improvement will be a good value for your property, and you will pay for all of it.

Whatever you decide to do, it’s best if you address the issue of tenant improvements in the lease. If you haven’t done that beforehand, you can add an addendum to the lease that makes it clear who is responsible for paying for improvements or whether they can be done at all.

Related: The differences between repairs and improvements

Here’s a sample of what I have in my lease:

That guards against renters who decide to take matters into their own hands during their stay and allows for some negotiation.

If you decide to let your tenant make improvements, you could include language like this, courtesy of Law Insider:

For work you will do:

That ensures you will be paid for work you do that is requested but not a habitability issue.

For work done by either party:

This clause makes it clear that you get to keep the improvements to the property.

A clause if the alterations devalue the home:

This is the clause you point to if you need to withhold all or part of the security deposit.

What if your tenant makes alterations without your permission?

As soon as you notice that your tenant altered your property without your permission, you need to act. At the very least, send a letter or email letting them know that you are aware of the change to the property and that this change is a violation of the lease.

Then let your tenant know the consequences of their action. The change might be something you like. If so, let them know that they don’t need to restore the property to the original condition but that you will not pay for the alteration since you did not approve it.

If you don’t like the change, tell your tenant to restore the property to its original condition. But if that doesn’t happen, let them know that you will do so and will deduct the money from the security deposit.

If the alteration was unacceptable and the tenant is not cooperating with you, you can choose to evict at that point for violating a lease term.

Related: 4 tips for first-time landlords

When you should consider making improvements yourself

Your rental property is an investment. You should, therefore, protect that investment by at least maintaining and repairing as necessary. It’s also a good idea to know what the competition is like in your area. Most tenants don’t stay in a rental property forever, meaning that you will probably need to re-rent at some point.

It’s good to understand what tenants expect in a rental property for your price in your area. If your rental is lacking, you might want to make upgrades to make it more desirable. Most renters, for example, like stainless steel appliances, renovated bathrooms and kitchens, and central air conditioning.

Related: Top 10 amenities renters can’t resist

The bottom line

Rental properties need improvements from time to time. The best situation is for you to be on top of maintenance, repairs, and possible renovations for your property. But if you don’t do that, or if your tenant has suggestions to improve the space, you might want to entertain your tenant’s request to make improvements. Just make sure you and your tenant completely understand the terms of the deal.

Have you let tenants make improvements? Have you ever improved your rental property? Tell us about it in the comments!

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.

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