Costly Mistakes Landlords Make
Hi,
can we all start a nice thread regarding the top Costly Mistakes you as landlords have made so far? especially on Legal Notices sent to tenants ....
I think this thread could actually end up to be pages of useful material for all,
thanks, Pam
trying to be to nice of course was my first lesson........km
tenant says he is having difficulty in paying rent this month, will pay 2 months' rent next month; you decide to be the nice guy and say ok.
I'd have to say being too nice as well. Some of my tenants are also friends and I let them dictate the rent too much. Where is that fine line where you want to accomodate your tenants, call the shots, and not make them resent you??
Good idea of yours!
I've never had to evict ... knock on wood.
I follow strict qualification rules.
My costliest mistake so far was blindly hiring + trusting a big management company. I ended up with a vacancy from 11/02-4/03!! in an area that has 30 days vacancy tops, even in winter. The 'agent' kept telling me he had a guy, he had a gal, he had... (lies) to keep me thinking it was rented. Finally, I ran my ad, showed and rented (AND FIRED). One of the callers of my ad told me he gave her the code to show herself my unit!! He let a total stranger go alone into my property! Lessons! :-(
my next lesson was putting everything , including the kitchen sink, in the lease agreement. in other words as much prop. protection as i could come up with....km
oh yes. a clear set of rules for eviction and staying the course when doing so.......km
I had to evict someone. After talking to the clerk at the housing court, I thought I could do it myself, didn't need an attorney. Big mistake!
amen ...........i always use an atty. i believe its money well spent...km
Tenants are like children. They don't need to like you, they need to respect you.
It's really hard to draw the line for being friendly and stearn with tenants. The best advice is to be incredibly friendly and absolutely never bend the lease.
That doesn't mean that you can't be creative. We had one tenant lose his job the same month that we were rehabbing a place. So we had him work off the rent for that month. He's a great tenant and we didn't want to lose him. That tenant is still with us, and will be for a long time.
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I was so nice and understanding that i almost lost my rental unit to a soft spoken single parent with two beautiful kids he had soo many different excuses and i swallowed hook line and sinker, the funny thing is how he know after eviction is living in town and paying rent to one of my competitors who has a I will throw you out in a minute mindset!.
i agree with the posting tenants are like children they dont need to like you, they need to respect you....
never ever again i learned the hard way
ps dont ever trade rent for side work.....
im still waiting for the body work and paint.......lol :-x :-x :-x null
When tenants move out owing you money:
1. Take Pictures of the unit
2. Keep receipts
3. Have workers give you itemized invoices on that unit
4. Go after them (collections) sooner rather than later.
Pretty good stuff out there already, I would say getting negative cashflow properties or too small magin properties plannnig for 100% occupancy and 0 repair dollars
Hey,
1) Making appointments to show people the house. They never show up and you waste HOURS.
2) Waiting too long to process an application. You have to process the app immediately (the same day or one day later), or the tenant goes to the next house.
3) Taking a personal check for a deposit.
4) Allowing the tenant to get a puppy.
5) Putting top of the line equipment (sinks, faucets, carpets, alarm systems, etc.) in the units.
6) Trusting tenants to clean gutters.
7) Trusting tenants to take care of the lawn.
8) Trusting tenants that the other people living in the house are "just visiting".
9) Hmmm...trusting tenants at all.
10) Not doing quarterly inspections.
this is great stuff .... keep this going. More tips and pitfalls please
Ditto trusting tenants to clean gutters.
Also trusting tenants to change furnace filters. Some do, Many don't.
And, the fireplace cleanings.
Smoke detectors maintenance.
And, certain yard maintenance...(leaves, snow, bushes, trees).
Regular contact reminders (seasonal or quarterly) certainly help.
Not checking the carpet under the "re-arranged" furniture upon crediting back the security deposit. What a newbie! Burn holes a plenty, and yes I'm still fuming...
Giving back deposit any sooner than you have to. Carpet deodorizer covers up pet smells pretty well during the walk-through, only to resurface a few weeks later.
Buying a row house in Baltimore, MD:
1- They require a NEW lead paint dust inspection (at $200 a pop) EVERY TIME a new tenant moves in.
2- They require you to register your rentals - $10 each every year.
3- Tenants can only be evicted if they are taken to court FOUR TIMES for late payment of rent.
4- It takes a MINIMUM of 60 days to evict tenants. In other words, they didn't pay rent? Say goodbye to ANY money for at LEAST the next 60 days!!
Hmmmmm... no wonder Baltimore City is full of run-down slums...no smart investor wants to mess with these politics!!!!! I sure as heck won't. It takes 10 days to evict in South Carolina and 7 days in North Carolina. Now THOSE are my kind of POLITICS!!
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Send a 5 day notice out immediately - if late.
Put in a clause if late more than 3 times, lease is cancelled and tenant must move out.
Get as much of a security deposit as you can get - minimum 1 mo security even with section 8 tenants.
Trust your gut - don't accept a tenant you have doubts about.
Having a real estate agent as a PM.
No motivation for managing the properties correctly - Their mindset: if they go bad and you lose money I can, and will gladly, sell them for you and collect that 3% (probalility to someone they know - and will PM for them too). A nice little recycle - they are flipping the property with your money.
Quote:
On 2004-10-08 07:22, Bruce wrote:
6) Trusting tenants to clean gutters.
7) Trusting tenants to take care of the lawn.
8) Trusting tenants that the other people living in the house are "just visiting".
9) Hmmm...trusting tenants at all.
10) Not doing quarterly inspections.
What about having a clause in the lease that if the tenant does the work, they get some compensation with regards to the rent? Something like "If <the tenant> mows the lawn, cleans the gutters, and tends the flowerbeds, $100 credit will be appled to the next month's rent"...
Not doing a walk-through (Landlord-Tenant Checklist) when they move in. In Georgia, not only do they get their deposit back in full, but Landlords are penalized three times that amount as punishment, and it can't be challenged or appealed. Either you have the form, or you don't. Case closed.
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My biggest mistake was not insisting on copies of the rent receipts when buying rentals that had tenants. I have had to evict 2 times and both tenants were probably why the place was for sale... Also buying with tenants that rent is under market value and then jacking it up to a level they can't afford....I may consider having tenant evicted prior to purchase in the future just to make my life easier.....
I thought NY's eviction process was bad. It's a piece of cake compared to MD. That's crazy.
One of my clients has had a woman in her 1BR for 2 years paying nada! Which speaks to good attorneys. Please make sure you have a strong L&T attorney. Make sure that is what s/he does, go to court & evict all day long.
My experience has been with prop managers for one of my investments. You must proactively manage the manager. They will tell you the place is vacant when in fact they are collecting rent in cash.
If they can't steal from the income then they will hire their family & friends that own companies (of which the prop manager has an interest) to do "repairs". One or both will happen when you audit the books, you will see the same invoice submitted & PAID umpteen times & the service may or may not have been performed. Audit the manager within reason & establish policies. Never pay an invoice if it is not an original (no faxes, copies) & have a cut off for bills. For example, if a vendor submits a bill for payment & the work was done 6 mos ago, question that until you're satisfied with the answer.
If you're an out of state investor, expect to have vacancies & you should be prepared to do a "fly by" or driveby on your way to your vacation destination to check up on your property & the manager. Stop by, pretend to be a potential renter, talk to the tenants & you will learn more than a little bit!
The manager was fired this year, but it took a while to get the principals on the same page to look into the issue. Which brings me to my last point, if you have partners, make sure they are of like mind.
just wanted to thank everyone who contributed. I am amazed at the level of response ....
thanks again, Pam
My most costly mistake was believing that my tenants cared about me & what I thought.
Basically they were my best friend when it came to the financial side of things (when they were late) but when it came to other interaction like getting maint in there, you would have thought I was a criminal.[ Edited by allhandl on Date 11/01/2004 ]
I love this thread. Lessons learned:
1) advertise as soon as I THINK they're moving out
2) don't be afraid to add pet and month-month fees
3) if you have a rental ad - you must be available to answer the phone 24/7, or else people move on.
4) don't be afraid to itemize and deduct from the security deposit, in MD we have 45 days to do this- wait for any smells to creep in!
5) Listen, listen, listen to your applicants, and trust your gut instincts.
6) plus everything else said here!!!!!
Hi actually some of my advice is contrary to another posting so take what I say with a grain of salt and lookinto it. I say forget the attorney for eviction. In South Bend Indiana, it costs me $600 just for the attorney to file the eviction. Then I have to wait a minimum of 2.5 weeks to have him get me a court date, and then after the immediate possesion hearing another 2.5 weeks for the sherrif to come out. I started doing them myself the difference? $46.00 filing fee, and the hearing, getting the sherrif out and changing the locks occured in less than seven days. Why pay $600 in unrecoverable debt when you cna do it yourself?
2) If resident pays utilities, they MUST have utilities switched before they take possesion ( Proof in your hand)
3) never ever let them take possesion early without a signed lease.
4) This is a reiteration, don't bend on the rules. It is bad business and could be a fair housing issue as well.
5) Contrary to what someone else said, your gut has nothing to do with who you rent to. Your written resident selection criteria determines that.
6) It's just business, it's never personal
This may be heresy (spelling?) but I think it needs to be added.
Even when you're dealing with another investor, check everything. I'm a newbie and recently purchased a duplex from an investor who is retireing from the REI business. I thought he was sincere in helping me start my real estate investment career. I have now taken over a tenent who skipped 2 months payments (I also fall in the too nice catagory), has left the building (no idea where), it's full of junk. To top it off, the ceiling is now leaking too!
Previous post says "It's not personal, just business" I agree 100% but it dosn't just refer to tenents.
I'm glad I found this website and joined. Those willing to help and share without profit motives are much better then those who help us learn the hard way.
thanks,
Have a wage assignment added to lease agreement. If they have a good job they will think, think, about not paying.
Leave your emotions at the door.
In the beginning i was always very understanding of my tenants, but have realized that human beings in general take full advantage of people that are too nice.
draw the line between fair and stern or they will walk all over you.
Respect is key !!!
What would a wage assignment clause in the lease look like, and how would you invoke it?
Thanks,
Andrew
I make the tenant pay the first $25. of each and every individual repair. It puts an immediate stop to frivilous repair requests. I had tenants calling me every week for one stupid thing after another until I told them they would have to pay the first $25. from now on (as specified in their lease agreement). They never called again- not even when the air-conditioner broke (in Florida). $25. seems to mean a lot to the tenant mind.
Selling your rental units too soon. Selling them before they are fully depreciated and then finding out a year later that there was a big jump in prices of investment properties in that same area...
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You would add a wage assignment to the lease. It reads something like: If a judgment is obtained against Resident in connection with this lease agreement, Resident agrees to have his/her wages garnished/assigned until said judgment is paid in full, including all related expenses.