said on December 21st, 2009 categorized under: Tenants
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With just three shopping days left until Christmas, it’s a good time to remember that small gestures, like including your tenants in your gift giving, can go a long way toward keeping your rental units occupied.
Times are tough for everyone, and our natural instincts are to cut back. However, as we discussed last year, small gestures like a gift card to a grocery store, iTunes or Targetcan be a way to differentiate yourself from other landlords.
And while $10 of downloadable music may not ultimately prevent anyone from moving out, it nonetheless fosters good will for the duration of a tenant’s stay, which may help keep rent payments on time.
said on November 12th, 2009 categorized under: Tenants
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With national vacancy rates at their highest levels in 23 years, Minneapolis duplex owners are having to resort to innovative strategies to attract and keep tenants.
While a fresh coat of paint, new carpet and a move-in incentive like one month free can help attract new tenants, what about keeping the ones you already have?
According to a recent article in the Wall Street Journal, more landlords are finding themselves in a position of having to negotiate. The Journal reports that in a recent survey conducted by the National Association of Independent Landlords, more than two thirds of independent landlords will reduce rent in order to keep a tenant, while almost one-third of them already have in the last 18 months.
At first glance, this study is frightening. If all tenants want to renegotiate the terms of their lease, won’t we be unable to pay our bills?
Consider this. A vacancy caused by an unwillingness to either establish a payment plan for a delinquent tenant or offer, say, a five percent discount to one who is struggling economically can cost you far more than the initial concession.
Turning a unit for a new tenant not only often costs you paint, cleaning, and repairs caused by normal wear and tear on a unit, but the lost revenue during the vacancy as well. In other words, potentially thousands of dollars vs. say, a discount of 5 percent as an incentive for a tenant to say.
Of course, you can’t be a doormat either. Some people in life will mistake your kindness for weakness, and exploit it accordingly.
But offering understanding to the tenants who’ve proven themselves, can be a a great way for you both to survive.
Comment
I experienced a bit of frustration this weekend as a tenant stopped me from showing a duplex to a buyer.
The tenant was out of town and didn’t feel comfortable, even if the listing agent was present, letting anyone into her unit. As a result, the listing agent, my buyer and myself had to rearrange all of our schedules to accommodate her return.
Trouble is, the law said we didn’t have to.
While I’ve said it before, it bears repeating. In the state of Minnesota, tenants do not have the right to 24 hour notice if a landlord needs to enter their unit for business purposes. The law says “reasonable attempt to notify”. Nowhere in state law does it define reasonable attempt.
Of course, this doesn’t mean a landlord should be inconsiderate. Not only does notice keep tenants happy, it gives them the opportunity to tidy up their unit, which ultimately helps it show better.
Many tenants, however, not understanding the process, use this as an attempt to thwart any sale of the property. It’s important, before going on the market, to explain to them that all of the protections afforded them in their lease will remain in effect upon and after the sale.
Fortunately for this seller, it is not a pre-foreclosure situation. Had it been, he would have lost three valuable days on the market, which could have cost him considerably.
Worse yet, had my buyer been less interested, he might never come back.
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Sometimes government rules and regulations just don’t make sense.
Take, for example, the city of Minneapolis’ rule on the number of unrelated people who can occupy a rental unit.
If a property has a zoning designation of R 1-3 (residential 1- 3 units), a maximum of three unrelated people can live in each of the units.
The number of bedrooms or amount of square footage in each is irrelevant. In other words, if you own a duplex with a five bedroom unit, you can only have three unrelated people living in it.
If the multi-family property is zoned R 4-6, however, you can have up to five unrelated people in each unit; even if there’s only one bedroom in each apartment.
Of course, if the other people occupying a unit are related by blood, marriage, or adoption, an R 1-3 property can house the family plus two unrelated people.
In a R 4-6 zoned multi-family building, a family can have up to four unrelated people living with them; again, regardless of the number of bedrooms in the apartment.
What happens if the city discovers there are more residents than allowed in a duplex? The landlord can lose his rental license.
So if you have a Minneapolis duplex, say, by the U of M or in Uptown with a couple of four bedroom units, how can you make sure you’re in compliance?
Get your tenants to marry or adopt each other.
Comment
With the passage of the first time home buyer tax credit, there will be many new Minneapolis and St Paul duplex owners learning to become landlords.
One of the most important first lessons is the importance of following Federal, State and local fair housing laws when selecting and advertising for tenants.
On a federal level, there are two laws you must follow when selecting tenants: the Civil Rights Act, which prohibits discrimination based on race and the Fair Housing Act, which prohibits landlords from discriminating because of race, color, sex, national origin, family status (including families with children), disabilities, religion or background.
In the state of Minnesota, it is also illegal for landlords to discriminate due to sexual or affectional orientation, marital status, or receipt of public assistance (such as Section 8).
The city of Minneapolis’ Civil Rights Act prohibits discrimination for all of the afore-mentioned categories, while the St Paul Human Rights Act also includes age. For a comparison, check the HUD web site.
When advertising a vacancy, it is important to realize you can’t make any statement in an ad that indicates a preference, limitations or discrimination based on the named criteria. So phrases like, “suitable for single woman” are not acceptable.
The ad should focus on desirable features of the duplex, amount of rent and availability.
It is important to note, that landlords who rent one, two or three units in properties that double as their own homes may be exempt from some provisions in the Fair Housing Act.
said on November 26th, 2008 categorized under: Tenants
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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!
Comment
During the recent real estate boom, selling small small multi-family housing (duplexes, triplexes and fourplexes) was almost as easy as simply sticking a “For Sale” sign in the ground and getting the property on the MLS.
But the rules have changed for everybody.
When investing in larger apartment buildings, one of the first questions a buyer asks is, “What are the rents?” In other words, how much revenue does the building generate every year? If the property doesn’t generate enough money to cover its expenses and mortgage, it obviously isn’t a good investment.
That principle is increasingly true in the small multi-family market. In addition to location and condition, more buyers are comparing the rent of one building to another.
A client recently looked at three gorgeous duplexes, all next door to one another, all in a fabulous location. All were three bedroom units, with separate utilities, fireplaces, built-ins and good tenants. They were slightly different in size, but almost imperceptibly so. The only obvious difference was one had two bathrooms per unit. All three properties were in a short sale situation.
O.K., slight detour here. What’s a short sale? Think of it like this. If I borrow $100 from you, and when it comes time to pay you back I only have $90 on me. In that case, I may ask if even though I’m $10 short, if we can still call it good.
In this case, the sellers of these properties may or may not be behind in their payments. And their motivations for selling may or may not have anything to do with financial duress. However, they recognize under current market conditions they can’t sell the property for what they owe on it. So they’re talking to and working with the bank to find a way to pay back as much as they can.
Back to the buyer. Three comparable properties, virtually next door to each other. One was listed at $369,000, one at $395,000 and the third at $409,000. All had taxable values at or above $500,000.
Which one did he write an offer on?
The cheapest one, right?
Nope.
Would it help if I told you the first grossed $30,000/year in rent, the second $31,200/year and the third $38,400. Now which one did he want to buy?
The one with the highest rents; which was also the most expensive.
While it may seem like $7000-8000 a year in rent isn’t that important (after all that’s “only” $650 or so a month), it made the difference as to whether the property could support itself financially. The less expensive properties didn’t generate enough revenue to even break even. As a result, the buyer would have to reach into his pocket every month to make up the difference.
Due to higher vacancy rates the last five years (everybody who could bought a house), landlords have been forced to keep rents low. The poor housing market has turned rentals around, however. Now, more people have been forced to rent. So rents can be raised.
It’s important to keep your rents as close to market value as possible. It will make all the difference when it comes time to sell.
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One of the questions I am most frequently asked by people considering purchasing their first multi-family property has to do with plumbing. More specifically, the toilet.
It seems the biggest fear about becoming a landlord is there will be a phone call in the middle of the night that a tenant’s toilet has backed up. And it will be up to the landlord to fix it.
First, I have been a landlord for over a decade. And in all those years, the only time I ever had a middle-of-the-night plumbing call was when a water heater actually burst and was spewing water everywhere. My inconvenience? Calling the plumber and signing the check! (It was the least I could do — my tenants were buying me my property after all.)
When it comes to toilets, however, a plumber charges too much. And, here’s a tip: they’re really, really easy and inexpensive to repair.
I had zero experience with fixing them prior to becoming a landlord. But I’d had the good fortune of stumbling across Home Depot’s book, Home Improvement 1-2-3. It had pictures, well, more accurately, how-to cartoons of almost every conceivable home repair or improvement. I took that book with me everywhere: propped it up on the back of toilet tanks, crawled under sinks with it…you get the idea.
The good news is, Home Depot still publishes it. The bad? No more cartoons. Just pictures.
And, if Home Depot’s actually closed, there’s always www.fixatoilet.com. No kidding.
