Top 5 Mistakes Landlords Make with Their Investment Properties

1Managing an investment property is no easy task. It may sound like big money, but if you are not prepared it can turn into a huge money pit. As a landlord, you have a big responsibility to the property as well as the tenants. One small misstep could end up costing you valuable time, energy, and money. That is why you must make sure you do your homework before jumping in. Do as much research as possible. If you look up the latest real estate trends in the area or ask a local expert, you will be able to find enough information to help you make the best decisions when it comes to your investment property. Unfortunately, many landlords want to get started so quickly that they do not think before they invest. Here are the top five mistakes that landlords make with their investment properties:

1.Choosing the Wrong Tenants

This is one of the biggest mistakes you can make as a landlord. If you are renting your property out to a stranger, you must take the extra steps needed to make sure you get the best possible tenants in your property. If you do not know them very well, there are certain precautions you can take. Have them prepare the following:

a) Application Form: Have prospective tenants complete a written application form. This will include standard renter’s information such as names, numbers, employer, previous residences, income, etc. Each adult who will be living in the property would need to fill one of these forms out and minors can be added as well. They would sign that all the information they provide is accurate to the best of their knowledge.

b) Credit and Background Checks: Tenant screening is a great way to see how financially stable your prospective renter is. Credit reports often show if someone has been late on payments and the amount of debt they already have. A background check is very important, not just for your peace of mind, but also in consideration of the neighborhood. You would not want to rent the property out to a convicted criminal. It would compromise the safety of the area and could also bring down the property values.

c) Referrals: Asking for referrals from past landlords and current employer is a great way to go the extra mile in finding the perfect tenant. If the applicants have not be great renters in the past, then they probably would not move forward with their application if referrals are needed. A referral from an employer would also give you confidence that the tenant is gainfullyemployed and able to make a monthly payment.

2. Failing to Create a Thorough Lease Agreement

Creating a good lease agreement is where part of your research will come in handy. Many landlords will print the first form they see on the internet. Unfortunately, this form could be outdated and only relevant for a certain location. Make sure to find an application that has all your stipulations and current local regulations spelled out. Some tenants will comb through the entirety of the agreement to try to catch something that the landlord missed to exploit it. For this reason, it is very important that you create a thorough lease agreement. Be sure to add any rules specific to your property in an addendums section.

3. Lack of Communication

If you make yourself unavailable to your tenants, you are doing them and yourself a disservice. Your office should always be open and you should always be available by phone. Sometimes, home emergencies will come up and your tenants will need your ‘okay’ or your help to get the issues resolved. It can range from something small, like a door coming off its hinges, to something huge, like a flood or leak in the plumbing. The sooner you can get back to your tenants, the better for them and you. The longer you let an issue go, the more difficult it will be to fix a problem and the more resentment your renter could have for you. You want to make sure that your tenants have a good experience so that they are not criticalof you to future renters. This is especially important this day and age where you can review anything and anyone on the internet.

4. Setting the Rental Rate Too Low or Too High

Make sure you are setting the rental rate within the correct range for the property’s age and location. There is such a thing as setting the price too high and too low. If the rent is too high for the area or for how old the property is, no one will want to live there. The longer your home sits unoccupied, the more money you are losing each day. In the same vein, you do not want to set the rent too low. You may be able to get someone into the home quicker, but you could be leaving a lot of money on the table. The whole point in taking on an investment property is to make money. The best thing you can do is look at other rental properties in the area. Try to stick within the range of rental pricing you see in the neighborhood.

5. Delaying Eviction Process

If you do find yourself in the position of having to evict a tenant, try to get the process started as soon as possible. You can expect it to take about 30 days from start to finish, but many times, it is delayed because tenants will come up with excuses. As soon as you can tell there is a real issue, you should begin the process. The longer you wait to get it rolling, the longer it will take. The longer it takes, the more money you will be losing. It is important to note that the tenant is still legally obligated to pay the back rent owed to you. However, if a tenant has opted not to pay rent up until this point, you may be out of luck trying to collect it from them in the future.

Being a landlord is a tough role! If you avoid these common mistakes that most people make with their investment properties, you should have an easier go at it. The main thing to remember is that the more research and preparation you put into renting out your property, the more return you will see on your investment.

Source: realtybiznews.com

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Ask The Attorney – Screening Question

ask-the-attorney

The Landlord Protection Agency®presents John Reno, Esq.,a highly experienced Landlord – Tenant attorney based on Long Island, NY.

Q:  Dear Mr. Reno:

I have a couple applying for my rental. The gentleman has a good credit history but his girlfriend’s is horrible. If I just have him on the lease and he leaves the rental due to a break-up, do I have a big problem getting her out of my house? What would I have to do? We are in Maryland.. Thanks. Jane W., MD

A: It’s a package deal. You like’em as a couple, or you don’t. Does his responsibility outweigh her lack thereof? That’s your call. Leaving her off the lease doesn’t help you- it only helps her. That would give her the right to occupy the residence as his companion- but no liability for rent. Bad move.

Legal Disclaimer
The Landlord Protection Agency’s “Ask the Attorney” column is for informational purposes only. The questions answered by Mr. Reno on this site do not constitute an attorney – client relationship and are not to be considered legal advice. Not all questions will be answered and some may appear in the LPA Q&A Forum.
The Landlord Protection Agency recommends that you seek legal advice before using any of the material offered on this web site, and makes no guarantee on the effectiveness, compliance with local laws or success of any of the material offered on this web site. The Landlord Protection Agency is not engaged in rendering legal advice.

Tenants are like a box of chocolates…

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Unfortunately, many landlords do not perform the easiest part of the landlording process: properly screening tenants. They take in subpar tenants whom put undue strain on the property while rent collections suffer. Choosing tenants is a landlord’s most important (and most risky) decision.

At Bev Roberts Rentals, we have a thorough and legal application process. We search for tenants who meet the landlord’s criteria, and not just the financially responsible one. Not every red flag is a deal breaker, but we have the experience to know which ones are. Want to learn more? Give us a call at (919) 306-5665.

Why most renters don’t want to buy homes right now

1Even though they’re becoming more optimistic about their financial situations, more people who rent their homes are foregoing buying a house.

One in five renters now say they have no interest in ever owning a home, up from 13% in January 2016, according to a report released this week by Freddie Mac. And nearly 60% of current renters expect to rent their next property when they make their next move, up from 55% in September.

This shift toward renting versus buying is occurring despite a relative improvement in the financial situations for many renters: 41% of them say they have enough funds to go beyond each payday, as opposed to living paycheck to paycheck or not having enough money for basic necessities, the highest level since October 2015, Freddie Mac found. Harris Poll surveyed more than 4,000 adults on Freddie Mac’s behalf, of which 1,282 were renters, to help produce the report.

And yet a sizable chunk of people are unhappy with renting. Nearly 40% of people Freddie Mac surveyed were dissatisfied to some extent with their rental experience, with young and urban renters — who are likely to be living in smaller, more expensive spaces — more likely to be displeased.

So why are they not buying? People’s attitudes toward affordability, which cut across generations, is a big factor. “Although their finances are better, renters are comfortable with continuing to rent with many believing renting will be more affordable or stay the same for them in the next 12 months,” Freddie Mac noted.

In particular, rising home values have hurt many would-be homebuyers. A recent report from real-estate website Zillow found that more than two-thirds of renters cite the down payment as the biggest obstacle to owning a home. Indeed, it can take more than a typical year’s salary in some markets to be able to afford one.

At the same time, rental markets have stabilized recently. “Rents have been relatively flat over the last year and we don’t expect them to rise much in the next year in most areas,” Svenja Gudell, chief economist at Zillow, said. “That urgency that once existed is not there anymore.”

Affordability is just one factor though — the availability of homes also plays a role. “Even if you were to go out and try to buy a home, inventory is so constrained you’ll have trouble to find one,” Gudell said. “If there’s not much advantage to owning a home versus renting, people will feel comfortable in the decision to continue to rent.”

Source: marketwatch.com

Have You Had Your Rental Home On The Market Long?

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As a #TriangleArea property manager, our main priority is maximizing your annual rental income. This means minimizing your rental vacancy rates. Have you had your house on the market long?! We can help! Give us a call at (919) 306-5665.
#BevRobertsRentals #Apex #Cary #Raleigh#WakeCountyNC

How Much Should You Keep in Rental Reserves?

by Attorney William Bronchick, Legalwiz.com

“Cash is King”, so they say, and investor would be wise to keep an adequate cash reserve for things that can go wrong in real estate, particularly rentals. It is easy to buy real estate with no money down, but it’s difficult to survive when you have no cash set aside for a rainy day.

There’s no magic formula you can use to determine how much you should keep in reserve in the real estate business. When I have rental properties, the four key factors I consider are strength of the local rental market, eviction time line and cost, the age of the property, and the type of neighborhood.

Strength of the Local Rental Market

The lower the vacancy rates in your area, the fewer reserves you’ll need for vacancies. Your local newspaper or your city’s housing department may have articles or statistics on vacancy rates. You should, at a minimum, have enough cash reserves to pay for one month of vacancy per unit, which is only an 8-percent vacancy rate.

Even in a good market, you’ll deal with problem tenants who may stop paying rent and require an eviction. Good tenant screening will help solve this problem. If you plan to rent properties, you should always, without exception, do a rigorous background check on tenants. This includes reviewing credit reports, employment verification, references, and calling current and previous landlords.

Eviction Time Line and Cost

The length of time it takes to evict a tenant is relative to your cash reserves. In pro-tenant states like New York and Massachusetts, it could take months and thousands of dollars in legal fees to evict a tenant—all while you’re paying the mortgage. In addition, in our experience, collecting back rents or damages from tenants who’ve been evicted can be futile.

Age of the Property

With newer and recently renovated properties, you won’t need to anticipate many repairs in the first few years. As noted earlier, we recommend that you always hire a professional property inspector before you buy. Inspectors will go through the property with a fine-tooth comb, which helps ensure you’ll have no surprises later on. Another thing to keep in mind is that many utility companies offer a fixed monthly payment option so you don’t experience payment swings each season if you’re paying for heating, water, or other utilities as the landlord.

Type of Neighborhood

If you’re renting properties in low-income neighborhoods, you can expect the turnover to be much higher than in high-income areas. In addition, multiunit buildings with small units and one-bedroom condos will attract more single people who tend to move more often than families.

Cash flow management is the bedrock of survival in any business, with real estate being no exception. Investors must be careful not to run out of cash or they will be soon out of business.

Hidden Costs That Can Diminish Your Rental Property Profits

1When purchasing their first rental properties, many investors believe that the assets will effortlessly bring in money. However, they soon discover the hard way, that owning rental units attract a myriad of costs, which can significantly dent the amount of rental income. It is, therefore, important for a rental property investor to understand what these associated costs are, and how to best avoid or keep them in check.

Unscrupulous or untrustworthy contractors As a landlord, you will have to work with contractors to grow and excel your rental investments. Some of these partners are property management companies, real estate agents, attorneys, accountants, as well as, service and repair contractors. Enlisting and retaining the services of these professionals naturally requires money, which ideally, should come from the rental property.
Hence, it is important that you get reasonably priced partners and contractors, who understand that for them to get their pay, your business needs to flourish. As such, their primary concern should not only be to get paid, but rather to help you grow your rental investments.

Problematic renters As ironic as it may sound, even though a tenant is supposed to give you income if you get a wrong one you might just realize that a large chunk of the rent goes to waste. For instance, the tenant might make you waste precious time to demand the rent each time it is due or compel you to spend countless hours mediating conflicts between him or her and other tenants. Similarly, you might incur costs evicting the tenant or fighting off legal suits filed by the renter.

A straightforward and economical way for you to avoid such costly inconveniences is to put in place a thorough tenant screening procedure to help you identify and qualify high-quality renters, who will pay the rent promptly.

Property maintenance One of the pains of a landlord is ensuring that the property is rent-ready and in the perfect habitable condition possible. While maintaining and servicing the rental units can be smooth and manageable, at times the cost can spiral out of control, more so, if the property is old and severely worn out. In such a case you might have to finance endless and costly repairs before the building becomes habitable.

If you wish to control such losses, make sure you carry out careful property inspection to evaluate the condition of the property before purchasing it. Moreover, only hire reliable, competent and affordable service or maintenance technicians, who will give the right solution. Lastly, inform your tenants through the rental agreement that they will be liable for certain types of property damages.

Insurance costs It makes perfect business sense for a property owner to protect his or her investment against any possible event. The challenge, however, sets in when the insurer considers the owner as an investor instead of the primary occupant. As a result, the owner has no option but to settle for the costly special landlord insurance coverage, whose premium averages about twenty-five percent more than the regular homeowners’ policy. Not only does this bite a huge chunk of the rental income, but it gets complicated if the resident terminates the lease before the full term, and the house goes for long without getting a new occupant.

A prudent way of managing such costs is to factor in the insurance premiums in the monthly rent and doing all you can to keep your renters happy so that they stay to the end of the lease. Furthermore, have in place effective measures that guarantee you always have prospective tenants who are ready to move in, immediately when the units become vacant.

Increased taxes Most states and municipalities have homestead exemptions where they offer tax breaks to owners who live in their properties. In contrast, however, they impose heavy tax burdens on the investment properties. Naturally, the tax burden will have an impact on the amount of rental income a landlord gets from his or her investment. Fortunately, there are other costs related to the rental properties which can entitle you to tax breaks. Talking to an experienced and credible rental property taxation expert can help you to identify such perks.

Miscellaneous Damages Another common yet difficult to predict cost are those that occur in the middle of another activity. For instance, a window could break during property maintenance or an AC unit could get damaged during servicing. Since it is practically impossible to foretell if and when you will incur such expenses, it becomes relatively difficult to keep the costs in check. Nonetheless, you can try to be extra careful when handling the repairs, and only let someone with the right experience and competence manage the repairs. If you hire a maintenance or service specialist, go for one who has adequate insurance coverage and offers service warranties.

Conclusion Most first-time rental property investors hardly think about the hidden costs associated with their investment until after they have purchased the units. Even though by then it might be too late to reverse the investment decision, it is still possible to keep those pesky costs in check. You only need to know what expenses are denting your income and take the necessary reactive measures to control them. Still, taking the time to assess and evaluate the property before purchasing it remains the best way to keep most of these hidden costs at bay.

Source: realtybiznews.com