Halloween in May

The weather today in Spokane felt so much like fall, that I thought I would post some fun Halloween Pictures.  This unit was one that needed a complete repaint anyway and it came empty right around Halloween a few years ago.  It is my favorite holiday, so I decided to go all out and create a “Haunted Apartment” that was open to the whole town.  The tagline was “Who Says Only Houses Can Be Haunted?”

And yes, it was a nightmare to clean up, but well worth the fun! Thanks to my friends who helped out by being mad butchers,  zombie brides, mummies, and crazy bingo masters.

PS. The fake blood was made from corn syrup, chocolate syrup and cherry powdered drink mix.

 

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Inner Voices

If you are anything like me, chances are you will find yourself waking up every third day or so with a raging case of self-doubt.  And that’s a good week.  Maybe I never got it out of my system in junior high school, but man I can do a hell of a job on myself.  On these days, it can be helpful to treat yourself like your favorite sports team during a losing streak.  They need your support and encouragement even more now than when they are winning.

One of the greatest myths about entrepreneurs is that we can actually spell the word entrepreneurs. No really, it is that we are these confident, invincible forces that sail through the world turning everything we touch to gold with our charm.  Nothing could be further from the truth.  I am a neurotic, doubting, worrying mess, just like you.  The only difference is that I have learned to act in spite of what I am feeling.  I can look at my inner psychotic and say “That’s nice dear, I appreciate what you have to say, but I am going to go ask the bank for a 3 million dollar loan, anyway. Talk to you later. Don’t eat the cat while I am gone.”

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.

Accountability Theory

Over the years, I have seen that people actually appreciate being held accountable.  It shows you respect them enough to give them a chance.  Holding someone accountable is very different from establishing rules.  I believe that setting expectations is a sign of respect, whereas making rules starts from the belief that people are going to fail.

Of course, there will be plenty of rules at your properties, both your own and those required by the landlord/tenant laws in your state. What I am talking about are situations involving a specific tenant, usually around rent payments or disruptive behavior. When an issue arises, the first step is to communicate directly with the tenant. It is important that you are in a calm and controlled place emotionally before you start this interaction. So give yourself time to blow off steam and release any frustrations you may have about the situation.

There is a saying, I think written by T. Harv Eker in Secrets of a Millionaire Mind and it is this: “You can be right or you can be rich, but not both.”  I remind myself of this when I am in a heated situation with a tenant.  I always try to stay focused on my desired result (i.e. rent payment, prompt move out, the end of disruptive behavior) and adjust my behavior in such a way to maximize the chances of achieving that outcome.

Once you are having a conversation with the tenant, it is important to clearly establish what you want them to do and when you want them to do it.  Most tenant issues follow this pattern.  You want them to pay their rent by a certain date or move out by a certain time or turn down their music after a certain hour. If there is any confusion about your expectations, put them in writing and give a copy to the tenant.  If it is a chronic issue, that written statement should be an official notice (i.e. a 3 Day Pay or Vacate or 10 Day Comply or Vacate).  For a tenant who is behind on their rent, you might just write up a simple letter that they sign, with the understanding that if they do not comply, they will be served with an official notice.

Once your expectation is clear with the tenant, it is your job to follow up if they are not being accountable to their agreement.  It is so easy to let this critical piece slip through the cracks, especially if you are frustrated with the tenant.  Don’t let that happen! Write a note in your calendar to remind yourself to follow up. I am often writing myself notes like “Joe, pay $300” or “Check with neighbors at lofts about noise” on specific days in my planner.  It is important for the tenant to know that you take your agreement seriously.  If you don’t follow up with them, they will know that they can continue to get away with whatever they were doing.  A simple phone call or text message is often all it takes to keep them on track.

It Doesn’t Matter if They Like You

Ideally your tenants will like and respect you, but when in doubt, go for respect.

One of the things I tell potential tenants is that I am really clear about my role as a landlord.  I am not there to be their mother or their friend.  My job is to be their landlord, which means I make sure everything is working in their home and I help resolve any issues that come up.  Any tenant who has had a landlord with poor boundaries really appreciates hearing this from me. One of my biggest landlord peeves is when people tell me that they had a landlord that would just show up in their living room.  Not only is that illegal, it is also a complete invasion of people’s privacy.

As a landlord, you are sort of like a police officer.  No one really wants to run into you, but when there is a problem, you are the first person they think to call.  It can take a little while to get used to this role, but it is best for everyone if you maintain it once you have it.  I am not saying don’t be friendly with your tenants and even get to know them personally, but draw the line at becoming friends with them.  I have a lot of cool tenants, some of whom have even invited me over for a glass of wine or to hang out at their bonfire.  I know I can’t because when they pay their rent late, it will be that much harder to give them a 3 Day Pay or Vacate Notice.

By being available for my tenants by phone and professional in my behavior, I can help establish a calm sense of community at my properties.   I do not participate in gossip or share my own personal or political beliefs.  I try to be neutral and focus on the interests of the tenant or potential tenant.  Unless someone says something that is outright offensive or blatantly discriminating, I just let people speak their mind.

There will be occasions when people don’t like what you have to tell them (i.e. “Yes, you do need to pay your rent.” “No, you can give.me a week’s notice and move out and expect your security deposit back.”), But if you strive to communicate in a calm and professional manner, chances are good that they will hear you and in the end you will get the results you want.  Sometimes the best thing to do is to say nothing at all and let the agitated tenant talk themselves down.

If you have done your job when people move in, the tenant should have a clear understanding of your policies and landlord tenant law. And if you have good systems and forms, you should have written instructions for many common situations. Even though they know the rules, people often try to push the boundary to see what they can get away with.  Hold firm and stay on message and they will bring themselves around.  You are running a business, not a social club.  Your bank doesn’t care if your tenants love you; they want you to pay your mortgage on time.

Landlord as Leader

As a landlord/owner of multifamily rentals, you are probably thinking about many things—tenant screening, building maintenance, finances, vacancies and more.  What you may not realize, is that you also need to think about becoming a leader.  People like to know that someone is in charge, especially when there are more than two household living on the property.  When you bought the property you became the person in charge and things will go a lot better if you embrace your leadership role.

It is a little hard to describe what it means to be a leader of an apartment building, which is probably why no one talks about it.  I get phone calls from my tenants about things that really have nothing to do with me, but it seems to make them feel better to tell me.  The other day a tenant called me to describe a situation involving her dog and a neighbor’s dog.  Interestingly, it was the tenant who called me whose dog was not on a leash.  Really, all I could do was listen.  There was not a problem for me to solve or any follow-up needed.  She was just rattled and needed to process with someone.

Sometimes there is a more critical issue that needs to be addressed.  Yes, it’s true, you might have someone get arrested at your apartment complex.  In these unfortunate cases, the best thing you can do is to communicate with the other tenants in a proactive and professional manner.  A leader does not perpetuate the rumor mill, but instead shares relevant and useful information.  Or maybe it is something more benign, like a maintenance project that you can inform your tenants about in advance. Sharing the details about timing and duration of the project and thanking your tenants for their patience and understanding can go a long way.

As the owner and/or manager, you are the only one with a bird’s eye view of the property. Your awareness of how specific events impact your tenants’ homes and your willingness to show up as a leader can have a profoundly positive impact on your apartment community.

Parking Lot Karma

Spend time in the parking lot of your rental properties (or in the front yard).  You will learn more, accomplish more, and build more relationships in twenty minutes than you ever thought possible.

Take an extra few minutes at your property every month, just standing around and talking with whoever shows up.  It could be a tenant, a neighbor, a dumpster diver, or even a police officer. It does not matter. Just be there and listen.   There won’t be any immediate rewards, but down the line when you need a ladder in a pinch or you have concerns about the tenants in apartment nine, the relationships you have built will serve you well.

In addition, even if certain tenants don’t talk to you, it makes a difference for them to see you on site, being willing to engage with people. Then when they have an issue, they will be more likely to communicate with you directly.

Rental Showing Packets

Create a simple packet for showing vacant units. It will make your life a lot easier because you won’t have to remember what to say every time.  And most potential tenants will be impressed by your organizational skills and appreciate having all the details about your property in writing.

The packet should have three parts:

  1. An attractive cover sheet that has all the vital details about the unit, security deposits, application fees, and your contact information,
  2. A one page sheet outlining your uniform background screening criteria,
  3. And the Rental Application and Release of Information Form. I use a separate release form so that I can fax that to employers/previous landlords without disclosing sensitive personal information about the potential tenant.

Here’s an example of the cover sheet I use at one of my apartment buildings:

Rental Packet Cover Sheet for Blog

Showing units can be a hassle, so I try to make it as easy for myself as possible. I just print out four or five packets, put them in a folder, and keep them in the bag that is always with me.  That way I am always ready for those unexpected appointments that seem to pop up.

Drama Detector

I have found that how a person behaves in the process of looking for an apartment usually mirrors how they will behave as a tenant. Sure, we all have bad days when we get stuck in traffic or get lost on the way to somewhere new.  I am not talking about those types of issues (besides, the good potential tenants will call you and let you know what is going on!).  I am referring to the person who calls to set up an appointment and then cancels and then calls again and then cancels.  Or when two members of the same couple call and don’t realize the other person has already talked to me.  Or my personal favorite is when some spends ten minutes on the phone with me asking me every conceivable question about the unit and then announces that their income is $700/month and the rent is $650.

Don’t ever work harder than a perspective tenant. Once I do a thorough job showing an apartment and explaining the application process, the ball is in the tenant’s court.  I never call a potential tenant back at that point.  It is their job to show up with a completed application and the screening fee.  If they don’t, I just move on to the next person. I have had people call and explain how they will need a letter from me or a form filled out so they can access a down payment assistance program and I say “I will be happy to do that for you once your application is accepted.”

I have had several occasions when someone shows up to look at an apartment and they spend a long time with me and seem very interested and then they even come back and look again with friends.  And they call me every twenty minutes asking a new question each time.  Then they text me and tell me they are going to bring their application in tomorrow.  And then I never hear from them again.

Filling a vacancy is all about non-attachment.  Do your job.  Be professional, courteous and friendly. Ask the potential tenant lots of relevant questions.  Explain how your business works.  And then let it go.  I know you need to fill that unit as soon as possible, but the harder you push; the more likely you are going to end up with a problem tenant on your hands.

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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