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How to Rent That Minneapolis Duplex Fast!

December 19th, 2008 categories: Multi-Family Property Investing, Tenants

It seems new investors and first-time home buyers have two big concerns about their first duplex: vacancies and the toilet.

Vacancies are a concern of any landlord. The longer a unit sits empty, the more significant the loss in revenue, and the more it costs you, the landlord.

So, how do you reduce vacancies?

While it may seem obvious, your first strategy is to buy a property in an area where people want to live. Think of the amenities you might want for yourself in a home. Do you like woodwork? Do you need a dishwasher? Access to laundry? Do you need easy access to public transportation?

Also consider the types of tenants a property might attract. For example, more bedrooms may be attractive to families; or, if near a university, a group of students. One bedroom units, on the other hand, will appeal to single people or young couples.

A fresh coat of paint and a clean, well-maintained property will always rent more quickly than those that are not. Try to make your vacant unit shine when compared to those of the competition. This doesn’t mean you need granite counter tops- just well-kept, clean, and reasonably updated.

While all of these are useful and important strategies, there is one more; the most effective of all. Lower the rent.

Gasp!

This is a common new landlord mistake; one I’ve made myself. It’s easy to look at competitor’s ads on Craigslist and decide your unit is superior, or to base the amount you charge for the unit on the cash you “need”.

But, but… yeah, I know. You really have to have $1000 a month for that two bedroom unit with hardwood floors. So, instead of renting it at $900, you hold out for your price. It doesn’t rent. Two months later, you lower the rent to $900 and it fills. So, while you held out, you lost two months of revenue at $900, for a total of $1800; all in the name of getting $2000. In the name of getting a whopping $200 more, you lost $1800.

Yeah, I know. It seemed logical to me at the time too.

Spoken by Kari Lundin | Discussion: No Comments »

How Much Is Too Much For A Security Deposit in My Minneapolis Duplex?

December 8th, 2008 categories: Tenants

When I lived in California, moving into a rental unit required almost as much in a down payment as buying a house. Landlords often asked for not only the first month’s rent, but the last and an additional security deposit.

In Minnesota, however, it seems to be the rule rather than the exception for landlords to ask for a security deposit equal in amount to one month of rent. To a tenant, this figure represents their last month of rent; creating the misperception that he or she doesn’t owe anything for his last month of tenancy.

As a result, landlords are often faced with the task of explaining to a vacating tenant that their deposit was meant to cover damages and any required repairs, as well as unpaid rent, upon move-out.

Is there a legal limit as to the amount a landlord may require as a security deposit? Not according to Minnesota law. Of course, any duplex owner needs to also be mindful that an excessive amount may cause prospective tenants to choose another property as their home.

It is interesting to not, however, that if a lease is a periodic tenancy, meaning it has no final date mentioned, the security deposit may be increased at any time. Of course, the tenant must be given advanced written notice. On the other hand, if a lease has a definite end date, the security deposit may not be increased.

At the end of the tenancy, the landlord must return the deposit, along with interest, to the tenants. Of course, unpaid rent and any amount necessary to repair damage or pay other debts related to the tenant’s residency may be retained.

Tenants who moved in after August 1, 2003 should be paid one percent interest per year of residency. Tenants who moved in earlier receive much greater interest payments. If residency began between August 1, 1973 and September 30, 1984, tenants receive 5 percent interest. If move0n was between October 1, 1984 and April 30, 1992, it’s 5.5 percent. Between May 1, 1992 and March 21, 1996, residents receive 4 percent interest on their deposits. And those moving in between March 22, 1996 and July 31, 2003 receive 3 percent interest.

Spoken by Kari Lundin | Discussion: No Comments »

The Tenants Will Leave If They Know My Minneapolis Duplex Is For Sale!

December 1st, 2008 categories: Buying A Duplex, Tenants

Sellers often worry tenants will leave if they become aware a property is on the market. However, not only does the existing lease protect the tenant, it is also a means of ensuring he stays.

A lease follows a property when it is sold. What does that mean?

Well, when a buyer purchases a duplex occupied by tenants with current leases, she assumes the terms and conditions of the existing leases. As a result, the tenant also retains all the rights and privileges afforded him under the previous owner’s lease.

Of course, once that lease expires, the new owner can replace it with a lease of her own, or ask the tenants to vacate (in accordance with state law, of course).

What if the new owner wants to move in? This can be accomplished if the buyer specified some portion or the entire property be delivered vacant, and the seller agreed to the terms.

How is this achieved? Most often, sellers offer a tenant a financial incentive to vacate. How much? To date, there are no guidelines for this in the state of Minnesota.

It is interesting to note, however, in other parts of the country, this is a rather common occurrence.

In fact, in some rent-controlled cities like West Hollywood, Calif., tenants may not be relocated unless either the new owner or a relative of the owner’s is planning to move in. What’s more, there are set guidelines as to how much that will cost. In a one bedroom unit, a tenant must be paid $7200; an amount that increases to $12,800 for a three bedroom.

While that may be in our future, to date, relocation fees here are still negotiable.

Spoken by Kari Lundin | Discussion: No Comments »

Ask Santa to Help Eliminate Vacancies in Your Minneapolis Duplex

November 26th, 2008 categories: Tenants

Although sometimes it seems Halloween marks the start of the holiday season, most of us still think of the Thanksgiving holiday as the big kickoff. It must be something about seeing Santa at the end of the Macy’s Thanksgiving Day Parade that awakens the urge to sing carols and go shopping.

While most of us think and worry about taking care of the family and friends on our holiday gift-giving lists, I’ve found also including tenants can be an easy and inexpensive way to help reduce my turnover rate.

Now I’m not saying you have to entice someone to stay with a plasma TV. After all, the Minneapolis and St Paul rental vacancy rates are finally below 5 percent; skewing decidedly in the landlord’s favor. Just think of who your tenants are, and keep it simple.

In one property, my tenants were predominantly young single professionals just starting their careers. I gave them each a $10 gift card to iTunes. They were not only surprised, but commented they had never had a landlord give them anything; ever.

In another building, my residents tended to be an older, more blue collar crowd. For them I alternated; giving gift cards to Cub Foods one year, and Wal Mart another. Again, the universal response was one of surprise and gratitude.

However, it’s important to remember that not everyone celebrates Christmas or Hanukkah. I’ve had residents of every religious persuasion. Therefore, when I purchase cards I make sure they express a general holiday wish, rather than one of a specific belief or tradition.

Yes, money’s tight for everyone right now; an additional expenditure the last thing any of us want. But a $10 gift card that might help someone feel welcome in your property is a much smaller investment than the cost of a vacancy.

Have a safe and happy holiday!

Spoken by Kari Lundin | Discussion: No Comments »

C’mon! It’s A Minneapolis Duplex! What If the Tenant Doesn’t Pay the Heat?

October 22nd, 2008 categories: Tenants

A relatively new landlord contacted me earlier in the week and asked some terrific questions.

In an effort to have the other side of her unit occupied before the first mortgage payment came due, she rented to someone with less than perfect credit. Just five months into the lease, the tenant was already late on one month’s rent. While the gas, phone and electric are in her tenants names, she’s certain they are also behind in some of these bills.

While the tenant has stable employment and worked with her to make amends on the late rent, he’s uncertain how he should approach the potential utility delinquencies. A friend suggested he contact the utility companies to check whether the bills have been paid on time.

What, if anything, can she do?

The answer is, not a lot. Maybe.

According to Xcel Energy, provided it’s delineated in the lease that the tenant is responsible for the utilities, the landlord is absolved from any obligation to pay these bills. Of all the utilities involved in living in a property, it is only the water bill that follows the property. The rest follow the person whose name they were in.

What’s more, sharing the current status of payments with an unrelated third party is a violation of most utility companies privacy policies.

There is, of course, an exception. If the lease contains a clause stating falling behind in utility payments is a violation, the tenant and property owner may mutually sign a third party notification letter. This letter is then sent to the respective utility companies. In the event the tenant falls behind, it is mailed to the landlord at his service address. If the letter is not pre-signed by both parties, it cannot be sent.

It is important to note that the standard lease available through the Minnesota Multi-Housing Association does not contain a third party notification clause. It may be worth a short appointment with an attorney to have it and a notification letter drafted.

So what if there’s no letter, it’s the middle of January, and the tenant is so far behind the heat is shut off? Won’t the pipes freeze and burst, causing thousands of dollars in damage?

Not to worry. In Minnesota, which is a cold weather state, if the tenant has filed for the cold weather rule, Xcel will not disconnect any electricity involved in a heating system between October 15 and April 15.

The same holds true for Centerpoint; again, provided the tenant has applied for the cold weather rule exception. If they have not, Centerpoint will disconnect the gas, but during the winter months will notify the landlord of such with or without a third party notification letter. In the summer months, however, it’s important to note that Centerpoint does require a third party notification letter.

Excellent question!

Spoken by Kari Lundin | Discussion: 1 Comment »

Eight Ways To Screen Prospective Tenants for Your Minneapolis/St Paul Duplex

July 18th, 2008 categories: Tenants

One of the biggest challenges landlords face is finding great tenants who not only pay their rent on time, but also take care of your property, communicate with you and are generally respectful.

Most landlords run a credit and criminal background check on any prospective tenant through companies like the locally based ASP Screening. The applicant must give you written permission to gather this information; which can be achieved by using MHA’s standard application.

For a nominal fee, usually about $20, these companies can almost immediately provide you with an individual’s complete credit report and a state by state criminal record. It is common to ask an applicant for this processing fee up front. This accomplishes several things: it proves they are serious, tends to weed people out who know their past is suspect, and reimburses your expense.

While these reports are useful, they often don’t contain invaluable information like evictions? Why? In Minnesota, the court costs of filing an eviction notice, then having it reported to the credit bureaus is hundreds of dollars. As a result, landlords often offer incentives for a delinquent tenant to vacate the property. Carrots they dangle include not reporting the rent delinquency to the credit bureaus, leaving the renter’s record clean and the next property owner they rent from exposed.

In addition to these reports, it’s imperative to call as many of the tenant’s previous landlords as possible, their employer, and any references you can procure outside of family members. After all, no matter how difficult anyone’s son or sister may be, family ties are always stronger than the most airtight of leases.

While all of these efforts are scientific, it’s also a good idea, on occasion, to trust your gut. I had once had an applicant who, while everything checked out, seemed off. I couldn’t put my finger on it, and by law, couldn’t reject him “just because” (or discriminate against him in any way). So I Googled him. Turns out he took a butcher knife to his family in a state I didn’t pull a criminal background check in.

Finally, there’s a new way to screen for all of the things that don’t show up via conventional means. KPIC, a CBS affiliate station in Roseburg, Oregon, recently reported on a new web site where landlords can share all the intangibles on undesirable tenants. For a subscription fee of about $30, DoNotRentTo.com lets you search for reports of an applicant trashing a place, was noisy, or exhibited any other sort of undesirable behavior.

This site also affords you an opportunity to report tenants whose behavior was unacceptable while living in your property.

While this site seems as if it could potentially be libellous, it does require the landlord be able to provide documentation of any incendiary events.

No system is perfect. But these are good places to start.

Spoken by Kari Lundin | Discussion: No Comments »

Change the Numbers When You Rent Your Twin Cities Duplex

July 7th, 2008 categories: Tenants

One of the most valuable lessons I’ve learned as a landlord is to make sure that the amount I charge for a security or damage deposit is a different amount than the monthly rent. This helps tenants understand that it is, in fact, for something other than the rent.

I can’t even count the number of times tenants have given me proper notice, then not paid the last month’s rent. When I approach them for it, the answer is always the same, “just take it out of my security deposit.”

That would be fine if I knew with certainty that the place will be left clean and in impeccable condition. Most of the time, it’s not. And if I’ve allowed the security deposit to be used in lieu of rent, I’m forced to pay for any repairs for damages caused by the tenant out of pocket. In order to be reimbursed, I then need to pursue the matter in court.

Simply making the amount different than the rent, along with offering a clear explanation that it may not be used for rent, helps prevent this misunderstanding.

Spoken by Kari Lundin | Discussion: No Comments »

The Up Side Of A Down Market

May 19th, 2008 categories: Buying A Duplex, Multi-Family Property Investing, Tenants

At the start of the decade, vacancy rates for rental units in the Twin Cities hovered near an almost incomprehensible two percent. Demand for places to rent came probably about as close at it could statistically to 100 percent.

As a result, landlords didn’t have to offer very much in the way of perks, upgrades or property improvements. Rent went up every year. And owners could almost do as little as stick a sign in the front yard and have the new tenant move in the front door while the old loaded things out the back.

Times changed. Low interest rates and the boom in housing wreaked havoc on vacancy rates. Qualifying for home loans was comparatively easy. It made more sense for a tenant with a good credit score to buy a property rather than rent. After all, that way he or she could realize the tax benefits and appreciation that come with property ownership.

Needless to say, vacancy rates skyrocketed. While low compared to U.S. markets, the cities of Minneapolis and St Paul spiked to seven and eight percent, while the outer ring suburbs saw double digit numbers in several types of units.

To attract tenants, landlords started offering incentives. If a renter signed a one-year lease, he might get the first month free. Some landlords gave away televisions, free cable, and when all else failed, decreased the amount of rent until someone decided to move in. Rent increases became almost unheard of.

Here’s the good news about today’s down real estate market. Fewer people are buying houses. Some are even losing their houses to foreclosure. Those folks still need places to live. So they rent. Demand goes up, and inevitably, so does rent.

In the tight credit market, it’s also more difficult for people to get loans. Which means there are fewer buyers for rental properties, which means purchase prices are going down.

Translation? In the short term, I’m seeing small multi-family properties on the market with very good cash flows. In the longer term, those properties will appreciate rapidly when the market rebounds. (And c’mon — in all the negative press, name one single pundit who’s said it’s never coming back!)

Seems like the best of all worlds if you’re an investor.

Spoken by Kari Lundin | Discussion: No Comments »

Free Is Good

May 18th, 2008 categories: Buying A Duplex, Multi-Family Property Investing, Tenants

Once upon a time, well, not that long ago, most of the landlords I knew used a couple of tried and true ways of filling a vacant unit: print ads and yard signs.

In college, I worked part time in the classified ads department of a major metropolitan newspaper. There was no such thing as taking Friday night off, because that was the last opportunity for people to get their Sunday ads in before the deadline. We were there until 9 and the phones never stopped. After all, didn’t everybody consult the Sunday classifieds when the were looking for apartments? Cars? A used drum set?

We’ve all heard how the daily newspapers are struggling to stay afloat. The Internet has become the “go to” place for many of us for news, weather and a calendar of happenings.

I learned this the hard way. That’s where renters are looking too.

For weeks I advertised a unique property in the local paper: to the tune of $100/Sunday (and they wonder why nobody’s advertising). On a good week, I’d get two calls. I spent hundreds of dollars trying to chase down a tenant. Nothing. Not only was I out the ad money, I was out rent too.

Out of desperation, I tried Craig’s List. I had over 30 inquiries in a matter of hours. Close to 100 overall. And it was free. The downside? Fielding all of those e-mails (the property wasn’t right for everyone).

Since then, I’ve spoken with a number of friends and clients who own income property. They’ve all had remarkably similar experiences.

The lesson? Why pay for terrible when free works better?

Spoken by Kari Lundin | Discussion: No Comments »

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Archive for the 'Tenants' Category

How to Rent That Minneapolis Duplex Fast!

How Much Is Too Much For A Security Deposit in My Minneapolis Duplex?

The Tenants Will Leave If They Know My Minneapolis Duplex Is For Sale!

Ask Santa to Help Eliminate Vacancies in Your Minneapolis Duplex

C’mon! It’s A Minneapolis Duplex! What If the Tenant Doesn’t Pay the Heat?

Eight Ways To Screen Prospective Tenants for Your Minneapolis/St Paul Duplex

Change the Numbers When You Rent Your Twin Cities Duplex

The Up Side Of A Down Market

Free Is Good