Ode to QuickBooks

What if I told you there was a product out there that could streamline your business, provide valuable real-time data about your properties and virtually eliminate any hassle associated with filing your tax returns? Furthermore, if you use it properly, it can make you love tasks that you used to dread. And it will only cost you a few hundred dollars.  The product is QuickBooks.

I don’t care what free money management software came with your new computer. If you own rental properties, even just one, buy QuickBooks Pro. Now.  If you can point and click and have even the most basic typing skills, you can learn to use it.  One of the most beautiful things about Quickbooks is that you can ease into it.  When I taught myself to use it, I treated it like a computerized checkbook register.  Little did I know that in one step of data entry, I was creating all of the information that my accountant needed to do my tax returns, all of the reports my bankers would want to see, and valuable reports that would allow me to keep track of my tenant’s rent payments. My awareness of all of these built-in features came much later.

I was really clear when I started buying property that I wanted to build a four lane highway and grow into it (which I did when I went from 2 units to 79 in three years).  Quickbooks was the asphalt on that highway.  I am so grateful for this product (and it has been a long day) that I decided to write a little poem . . .

Ode to QuickBooks

In the past

My receipts would tatter

And day after day

I had no idea what was the matter

Try as I might

I lost sleep at night

Because I had no idea of my numbers.

On a fateful day

Not so long away

I taught myself to enter

Everything that brought my business to center.

Now I peacefully slumber

Enthralled by the numbers

Knowing that my data

Has nothing the matta’

And that when I awake

The cheerful noise you do make

Will let me know

That as I grow

I can do my books quick

And still have my pick

Of how to report

On my free time spent at the resort.

One of these days, I am going to post some links to help you learn to use QuickBooks.  Be sure to follow my blog, so you don’t miss that information (as well as any future dreadful poems).

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Checking Out Your Options Regarding Property Management Companies (part 2 of 2)

If you want to explore the option of hiring a company, here are some questions to ask perspective property managers:

  1. What type of property do you specialize in?
  2. What do you see as the role of the owner in the property management process?
  3. Will you require me to have an onsite manager?
  4. How do you work with on site managers?
  5. What does your fee include?  Lease ups?  Legal fees?
  6. Addressing problem situations:
    1. How long do you let a tenant fall behind on their rent before taking action?
    2. What is your process for dealing with noise complaints?
    3. What is the biggest challenge you have dealt with as a property manager and how did you handle it?
  7. Do you offer routine maintenance services?  Landscaping?
  8. What are the costs of these additional services?
  9. Does your company have a set policy on how you interact with tenants?
  10. Who is your accountant?  Attorney?
  11. Do you have a list of current clients who would be willing to talk to me about your services?

And don’t forget the rule of three (see “Working with Contractors” posted under Rental Property Maintenance).  Be sure to block out enough time to talk with at least three property management companies.  And don’t make your decision based solely on price, because it will probably end up costing you more in the long run.

If you are still on the fence about diving in and becoming a landlord, here are some unexpected benefits of managing your own property:

  1. Low vacancy rates—the more units you rent, the more you get paid. Self interest is a great motivator.
  2. The celebrity factor—I can’t set foot on my properties without everyone wanting to talk with me (and it is not always bad stuff)  Tenants, neighbors, contractors, everyone has something to say
  3. I have met people I never would have met in my ordinary life.  It is interesting.  It is better that TV.  It is like traveling without leaving home.
  4. You are a part of the community.  In fact, you are a leader in your community.
  5. You can make a serious positive impact on people’s lives beyond what you ever thought possible. Hopefully soon I will have an audio file posted that gives you a powerful example of this from one of my apartment buildings.
  6. You will learn more about yourself and realize your potential more than you ever thought possible—all while making money (hopefully)!!
  7. You get to create your own corner of the world.  For me, good manners are important.  I treat my tenants well and don’t tolerate bad behavior and, in turn, I am creating little pockets of better manners in the world.

Why Property Management May Not Be a Simple Solution (part 1 of 2)

OK, you are reading the books, you went to the seminars, you have saved some money up, and now you are ready to buy.  You have chosen your strategy and if you are successful, you are going to end up owning some real estate.  Hopefully sooner rather than later.

What I have noticed is that all of the guru’s tend to gloss over the part about what happens once you actually own the real estate.  The mantra seems to be “Oh, well, you can just hire a property management company to take care of it for you.”  Let’s explore why that not be such a simple, or even desirable approach.

  1.  Property management companies cost money, often 10% of your gross rents.  When you are just starting out, you may not have those kinds of margins.
  2. Many property management companies will not take on smaller properties, or they will require that you hire an additional on site manager (who you will also have to compensate)
  3. Property management companies often charge extras for things such as evictions, unit turn overs, and yard maintenance
  4. Property management companies do not share your self-interest of filling vacant units—they get paid regardless of whether or not the units are filled—you do not get paid unless there is some actual cash flow
  5. If you have never managed a rental property and maybe it has been a long time since you lived in one, how will you know if your property manager is doing a good job?  Could they be improving their performance?  How do you even have a baseline to judge from?
  6. Have you ever dealt with a property management company?  Did they leave with a warm and fuzzy feeling?  Were they a source of joy in the world?

So, whether your reasons are financial, developmental, or personal, you might need to think long and hard about the realities of putting your property under management.

Check back tomorrow for some specific questions to ask potential property management companies.

Letting Off Some Steam About Security Deposits

One of my least favorite parts of being a landlord is determining how much to charge people for damages and cleaning when they move out of a property.  This process ultimately drives the decision about how much of their security deposit they will get back.  Contrary to most people’s image of the money-grubbing landlord who wants to take you for all you are worth, when I sit down to fill out the paperwork I become a blubbering mess. I take other people’s money pretty seriously and I need to make sure I have ample justification for the charges I am claiming.  The other day, I was trying to explain to my assistant how this traumatic process turns me into a babbling idiot, and then two days later I was reminded why.

Let’s call this tenant Lisa.  Lisa and I have known each other for about six years.  She was one of the tenants in my first rental property.  When I sold that duplex, Lisa continued living there and we lost touch.  About two years later, Lisa got in touch with me because she had moved out of the property and the new owner refused to return her pet deposit because he said he never received it when the property changed ownership.  I went back and looked at all of the closing documents and sure enough; there was no record of the pet deposit. Technically this oversight was not my fault, but I believe in tenant’s rights to their money so I started making some phone calls.  The Title Company said it was not their fault because they operate under the direction of the parties to the transaction.  And not surprisingly, my voicemail message to the new owner (who I had also helped out a great deal) went unanswered. Technically, it was his fault for not checking the documents at closing.  In my message, I proposed that he and I split the cost of $200 so that Lisa could get her money back and we all could move on.  When no one else stepped up to take responsibility for the mistake, I decided to give Lisa the $200 out of my own pocket (which was pretty empty at the time).  I gave her the money right before Thanksgiving and she was extremely grateful. Everyone left with a warm and fuzzy feeling.

Fast forward a few years when I get a phone call from Lisa, who is in a panic.  The house she is living in now is full of mold and it is making her granddaughter sick.  She needs to move immediately and is wondering if I have anything available.  I happen to have a one bedroom apartment and so we negotiated an arrangement and I helped her talk through the best way to deal with her current landlord.  Lisa moves in and everything is going well, for the most part.  Her son and daughter in law move in next door for a little bit, with some concessions on my part for their financial history.  They also are fairly decent tenants. After about a year, Lisa suddenly gives me notice to move out.  She is on a month to month contract, so although it is unexpected her notice is perfectly legal.

It comes time to do Lisa’s security deposit return and I have the attention span of a flea.  I finally force myself through the process and get it done.  Lisa moved out in a hurry and had a cat and dog, so things did not look great.  Out of $600, she was only getting about $100 back.  I had ample documentation and the refund was pretty generous on my part. Forty eight hours after the check went in the mail, the text messages started flying. “I know I gave you more than $600 in deposits.” “I paid $400 for the pets.” Needless to say, I had a complete copy of Lisa’s paperwork that I checked before I sent the refund.  I told her this and yet her protests continued.  I reminded her that I cut her a deal on the pet deposit as a courtesy because of the history we had.  She kept at it and I told her I would send her copies of the paperwork the next day (copies of which she was given, but of course, lost).  Sure enough, all the paperwork lined up with my calculations.  When I sent her a message telling her the documents were in the mail showing that she only paid $200 for the pets, she claimed that she gave me more money after we signed the Rental Contract.  I told her that both pets were on the original contract and if she felt like she needed to research her payments to me with her bank, then she should feel free to do so.  Mind you, this is a woman who had gotten behind on her rent payments and completely lost track of what she owed me. I also sent her a complete register of all the payments she had made me.  I know more about this woman’s finances than she does.

So this dramatic response is why I hate returning people’s security deposits.  It brings out the worst in people.  It is like being spit in the face by a stranger after you just helped him change his tire in a downpour. I am going to continue to be fair, respectful and kind to my tenants because that is how I want to be in the world. Though, I think I might start doing a shot of tequila before I return their security deposits.

Simple Financial Planning Can Go a Long Way

I learned this tip by accident, but now I swear by it.

Don’t have your mortgage/commercial loan payment due at the beginning of the month.  I find the best dates are between the 15th and the 25th.  This arrangement allows me to focus on collecting rents and communicating with any tenants who are late during the first two weeks of the month.  Then once the funds have all been collected, I can focus on paying my major bills.

If you are planning to acquire a new rental property, plan to close on the property after the 15th, so that your payment is due after the 15th.  Your closing date normally determines when your first payment will be due.  If that doesn’t work for your transaction, negotiate with your lender to adjust the payment date.  Even if it costs you a few hundred dollars in interest at closing, it is well worth it in the end. Collecting late rent is one of the headaches of being a landlord, so off-setting your loan payments from your tenant’s rent payments will help reduce the stress of late payments from tenants.

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