Archive for the 'Tenants' Category

Can You Rent Your Short Sale Duplex?

said on November 18th, 2010 categorized under: Short Sales/Foreclosure, Tenants

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for rentThe other night I stopped by a Minneapolis duplex to see if I could help the owner avoid the potential credit and tax consequences of foreclosure.

Guess what I saw in the front yard?

A “For Rent” sign.

Mind you, the sheriff’s sale has already happened on the property; meaning the owner has six months or less to either redeem the loan or lose it to the bank.

And the owner is within his rights to collect rent (unless the lender has told him otherwise).

But if you were a tenant and knew the duplex was in foreclosure, would you want to move in? If so, would you expect a discount on the rent?

Perhaps the owner simply planned not to tell them.

Trouble is, Minnesota state law requires him to.

A duplex owner in foreclosure must notify a prospective tenant, in writing, not only that the building is in foreclosure, but also the date the redemption period ends.

What’s more, the owner cannot lawfully sign a lease that extends beyond that redemption period.

So what’s the worst that can happen? After the bank reposses the duplex, the tenant can sue the landlord; not only for rent, but also for defending against an eviction case brought by the bank.

Seems to me like this guy’s got enough trouble already.

Have You Increased Your Duplex Cash Flow Lately?

said on October 21st, 2010 categorized under: Tenants

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Water tap dripping dollar bills, Water waste conceptLast night I spoke a with a long-term duplex owner struggling to decide whether or not he should sell.

His property has a positive cash flow every month, but with children and a house miles away, he no longer wants to be a landlord.

He also knows his duplex is no longer worth what it once was. Knowing that, he grudgingly leaned toward keeping it.

I asked him what his decision would be if he had a better cash flow.

His mood and his position quickly brightened.  The answer was easy. He’d keep the duplex.

I reminded him there might be ways to do just that; by reviewing the property’s expenses.

I asked if he’d shopped his insurance rates lately. No.

Had he reviewed the water bill? Installed low flow toilets or water-saving shower heads? No.

Had he increased the fees for laundry by 25 cents a load? No.

Had he passed on any rental increases? No. He was afraid his tenants would leave if he increased the rent.

I asked whether he thought they’d rent a truck and bother their friends for help moving heavy furniture over $10-25 a month. He didn’t think so.

By the end of our conversation we’d found ways to increase his cash flow by more than $100 a month.

He still didn’t want to be a landlord, but the raise in pay helped ease his pain.

Get Out More Than You Put In To Your Minneapolis Duplex

said on October 14th, 2010 categorized under: Tenants

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Granite CountertopI have a client who insists on putting granite counters in the kitchens of every duplex she buys.

She argues that upgrade is why her properties stay rented.

She may be right.

Most of us would agree that many of the foreclosed and short sale duplexes on the market today are in need of a face lift. But when looking at them for rehab and rental, it’s important to keep in mind the return you may or may not get on your improvements.

For example, will granite countertops mean you can charge $50 more a month in rent? Or will they just help you avoid vacancies?

And if they will generate more income, how long will it take you to recoup the cost of the improvement? For example, if the granite counter tops cost $500 to install, and they result in $50/month more in rent, they’ll have paid for themselves in 10 months.

But will granite countertops generate more income? Or would your rehab dollars be better spent fencing the back yard or installing an air conditioner?

That’s why it’s important to know who your prospective tenant is, and to consider what’s important to them when making your decisions.

My clients properties are in an outer ring, affluent suburb with a highly respected school system. They are all three bedroom units, so her typical tenants are likely to be a families with children.

While a fenced back yard might be enormously appealing, I should also share that while this suburb has very few duplexes, most of them are within a two block radius of one another.

A granite counter top may help distinguish her property from the competition. But is it worth $50 more a month in rent? Or would a fenced back yard bring a better return?

The neighborhood will decide. So too will yours. Consider its personality when you’re fixing up your duplex. Not only will it save you money at the Home Depot checkout, it will help you make more on the first of every month when rent comes due.

MLS Now Makes It Easy To Find Tenants

said on August 27th, 2010 categorized under: Tenants

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Property for rent concept illustrationStarting September 1, duplex home owners looking to lease their units will be able to list them on the Minneapolis/St Paul MLS.

This will help more property owners expose their vacancies to a greater number of prospective tenants, as well as provide a centralized destination for people to find places to live.

It will also help duplex sellers who are having difficulty finding a buyer market their property for rent until market conditions improve.

The rental section of the MLS will feature single family homes, condos, townhouses, apartments, duplexes, triplexes and fourplexes.

Listing your rental on the MLS can be done through any Realtor who’s a member of the MLS. The listing must include an offer of compensation; an amount that will be a flat dollar amount rather than a percentage.

Rental listings will look much like those for properties that are for sale, including a list of amenities, length of the lease, rent amount and one or more photos.

Properties being actively marketed for sale may also be listed separately as rentals; resulting in two listings and two MLS numbers.

If you’re interested in getting your property rented, call me. I’d be happy to help you get it on the MLS.

Minneapolis Duplex Homestead Tax All Relative

said on August 12th, 2010 categorized under: Tenants

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Moving in or outIn today’s slower real estate market, many duplex home owners who have to relocate due to employment,  expanding families, or other life changes, are exploring moving family members in to their old units.

The thinking goes that if a relative is on the premises to manage the property, perhaps maintenance and upkeep will stay on par with the owner’s standards.

The other thought, of course, is perhaps the property will continue to qualify for homestead property tax status.

In the city of Minneapolis, qualifying relatives may become substitute occupants for the duplex owner.  Relatives  of the owner are defined as a child, stepchild, daughter-in-law, son-in-law, parent, stepparent, parent-in-law, grandchild or grandparent, brother or brother-in-law, sister or sister-in-law, aunt, uncle, niece, nephew, or step nieces or nephews.

Of course, the city isn’t going to let the duplex home owner off that easily. Relative homestead property residents have to apply for a Rental License through the city, which may cost the duplex owner an initial inspection fee as well as a $65 license fee.

Minnesota Tenants Get Trashed

said on June 3rd, 2010 categorized under: Tenants

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garbage canOne man’s junk is another man’s treasure.

According to the state of Minnesota anyway.

I was reminded of this last night when I a unit tenants had recently vacated.

It was a mess. Everywhere my clients and I looked there were pieces of broken furniture, abandoned clothing, framed posters on the walls…

All of which needs to be stored and taken care of by the owner, for the next 60 days.

Of course, that would involve cleaning up the duplex, boxing and packing the departed tenant’s belongings, and moving them to a storage unit. Or moving them to the garage. Or, I suppose, leaving them right where they are, which, I assure you, would not entice anyone to rent the place.

While it’s a pain, and the likelihood of recouping damages is remote, the landlord does have a claim against the tenant for the costs she incurs in boxing, moving and storing the property. Of course, recouping that may involve legal fees.

There is some good news. As a result of the passage of the “Tenants Bill of Rights”, after August 1, 2010, the number of days a landlord has to store abandoned property will drop to 28 days.

What’s more, regardless of the length of time, the duplex owner may sell the abandoned belongings once the required storage time has expired.

The owner must make a reasonable effort to notify the tenant of the pending sale at least 14 days before it occurs.  Notification must be in writing; either by personal service or certified mail.

Who knows? After all, there might be the Antiques Roadshow treasure buried in the trash.

Offer Tenants A Rent Sale

said on May 27th, 2010 categorized under: Tenants

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ChecksIn my years as a landlord, I’ve learned some tenants have no sense of time.

Rent would be due on the 1st. But that came and went, then it was the 5th, the 10th and, before I knew it, I was certain I was going to have to start eviction proceedings.

It’s always  just about then I finally get a rent check. The tenant had the money all along; he simply hadn’t gotten around to paying me.

Years ago, I thought I discovered a relatively easy fix to this problem; late fees for rent checks delivered after the 5th.

Minnesota law states when a tenant pays the rent late, the lease can require that the tenant to pay a late fee. Of course, the lease has to say how much the late fee is and when it’s due.

But here’s the catch. The late fee has to be for a “reasonable” amount that compensates the landlord for the actual damages resulting from the tenant’s late payment.

The late fee can’t be punitive.

For example, the landlord may incur late fees because the delayed rent caused her to be late on her mortgage payment. The landlord must also be able to substantiate this claim.

A landlord may also not assess punitive charges. An example might be a $10 a day late fee. This figure is in all probability illegal  because it doesn’t have any correlation with the extra expenses incurred as a result of the late payment.

In other words, the penalty resulting from actual expenses incurred probably isn’t going to be significant enough to inspire anyone to action.

But what if you offered a discount for early rent payments?

Some landlords include language in their leases that states the monthly rent is $950. However, if the tenant pays before the 1st of the month, he receives a $50 discount.

In effect, perhaps you wanted $900 for rent all along. Offering a discount entices the tenant to pay on time.

After all, we all rush to the store to take advantage of sales or coupons on the brink of expiration. The stores know discounts inspire us to action.

Wouldn’t the same be true of rent?

Another Duh! Landlord Moment

said on May 21st, 2010 categorized under: Tenants

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Duh! Road SignIt’s spring.

For a Realtor, that’s a synonym for busy.

As such, I am so focused on my career that sometimes I forget to do things in my own life.

Like renew leases.

When I realized I’d done this the other day, I panicked. I hate having a vacancy in winter, and live in fear of carrying one through the snow. So, to ease my sense of panic, I typically try to make sure my leases begin and end early in the spring.

Of course, this year, I forgot to issue the new lease. And when I realized this, I immediately had the thought, “Crap! Now their lease will begin and end in the middle of the summer!”

Summer isn’t bad. But if my tenants would move out, it would probably take me a month to get the unit turned over to a new renter, which means that lease would commence more toward fall.

That is, if it’s a one-year lease.

But the thing is, nowhere is it written that a lease has to be one year in length.

Thinking a lease has to be 6 months or one year in length is simply a mental habit I’ve gotten in to.

In fact, there’s nothing at all to keep the agreement from being any length of time I determine; like 9 months, 11 months, or, if I really want to make sure I’m covered, two years.

A lease is simply an agreement between two people. If my tenant agrees to a ten month lease, I’m right back on track for spring.

I wonder how he’d feel about a 10 year lease…

Why Rent Credits Are A Bad Idea

said on May 17th, 2010 categorized under: Tenants

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green lawnWith last week’s rain and this week’s sun, lawns in the Twin Cities are growing like crazy.

In fact, if you own your own home and a duplex or two, lawn mowing could become your full time job. But odds are good you already have one of those and mowing is just something you do on top of everything else.

Wouldn’t it be easier to just give one of your tenants a rent discount in exchange for mowing for you?

Probably not.

In my early years of property ownership, I often traded reduced rent for help with snow, the lawn, painting or some other job I simply didn’t have the time to do.

This always seemed to work out…initially. As time went by, however, I discovered more often than not, my tenants didn’t keep their end of the bargain; at least to my standards.

Weekly mowing soon happened on every other Saturday. Snow was shoveled three days after it snowed.

Why?

Because it’s difficult to enforce the labor required for a rent credit.

You may tell the tenant she  has to make up the $50 in rent she was credited for lawn mowing. From experience, however, I know the odds are that she’ll never pay you; because she feels she did a good enough job as it is.

The next thing you know, you’re chasing her for money, she’s dodging you and the grass is long enough for braiding.

On the other hand, when you hire someone, they generally the work in order to get paid. If it hasn’t been completed to your standards, you can simply withhold payment until it is.

An easy solution, but one it took me too long to  learn.

Minneapolis Duplex Owners See Changing Signs

said on May 3rd, 2010 categorized under: Tenants

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For Rent Real Estate Sign Isolated on a White Background.If you could swear you’re seeing fewer “For Rent” signs in area lawns and windows, you’re right.

A report by GVA Marquette Advisors released on Friday announced that Twin Cities vacancy rates dropped to 6.1 percent for the first three months of 2010.

This figure, while still historically high, represents a significant drop from last fall’s 7.3 percent vacancy rate.

While GVA Marquette Advisors tracks this data for communities with at least 10 units, trends in this sector also influence smaller multi-family properties.

Marquette’s report estimates that job growth and an improving economy lead to 1800 vacancies being filled in the metro area, with affordable urban and close-in units going first.

Of course, the increased numbers of vacancies the last few years has lead to more rent concessions and incentives. Collectively, this has lead to an average effective rental rate which is 2 percent lower than it was one year ago.

Continued vacancy rate reduction should, over the long term, force a shift in this trend as well.