Monday, July 31. 2006Raising The Rent Pt. 3
Delivered the good news of a rent hike to the tenant. Hand delivery. Got a verbal confirmation of acceptance. It was a pretty modest raise in the rent, so there shouldn’t have been any issues. Especially considering how far below market the rent actually is.
They had no qualms with the increase. So the proper documents will be drawn up in the next couple of weeks for the new lease. In the meantime, a copy of the letter goes in the file. Done. But not as done as I initially thought. Two days after agreeing on the new rent I got a phone call. Leaking toilet, but nothing that a shallow pan wouldn’t be able to handle over the next 24 hours. It was early evening so I agreed to drop by the next day, on my day off, to take a look. No big deal. When I arrived the next day, just after noon, the front door was wide open and fans were blowing every which way. It was close to 100 degrees outside, so this wasn't being done for the sake of fine breeze. The smell inside also indicated some previously-standing water. It had that "tap" scent which you usually only smell in basements or well-houses. Apparently, some time in the early a.m., the high pressure hose which runs from the valve off the wall to the bottom of the toilet's filling tank, cracked a connection and began blasting water all over the bathroom. Into the hall. And half a bedroom. Fantastic. My simple plan to replace a hose, maybe an o-ring or two, and then carry on with my day was effectively drowned right then and there. Luckily it didn’t take too long to get things sorted out. The cost of renting a wet-dry vacuum and a steam cleaner are going to be removed from the next month’s rent check, no problem. There’s no accounting for inconvenience, but then again, there’s no accounting for plastic fatigue on a toilet hose either. Next time I’ll discuss what all I saw whilst surveying the damage brought by the spewing toilet line. Wednesday, July 26. 2006Raising The Rent Pt. 2
The first step in deciding how much to raise the rent for my tenant involved some simple math. Knowing that I was renting below market, and that I really wasn’t intending on stacking a 25% increase on the Tenant all at once, because again, I really like this tenant, I made some back-of-the-envelope calculations involving the total increase in property taxes.
The total hit I’m taking from the tax-man is an extra $600 per year on the duplex. So that’s $300 per side, per year. Boiling down to $25 per month, which should be pretty easy to swallow, and I’ll leave it at that. But obviously, I could have taken this opportunity and treated it like the proverbial bandaid-ripping by stacking some other accrued/planned costs into this rent hike. Other possible reasons for bumps in rent that could be similarly calculated: 1. adding to or starting (!!!?) the maintenance contingency fund 2. beginning savings for a beautification project like landscaping 3. put toward paying off an uninsured disaster of some sort 4. put toward a new amenity such as washer/dryer, screen doors, or skylights. Although, with that last one, I’d recommend buying and installing the amenity first, and then using their use of the thing to justify the rate hike, accepting the risk that they may choose to leave as a result. Set with the $25 bump in rent, I composed the following letter to be sent via email AND by hand delivery. I coincided the increase with the renewal of the lease, as it wouldn’t make much sense to try and renegotiate a loaded lease in mid-stride. File the letter along with whatever documentation of acceptance you receive (new rental agreement, amendment, spit-shake). Best to get as long a paper trail as possible with these things. I hand delivered the letter in order to garner an immediate response from the tenant. Otherwise, I would have to requested some other form of written acceptance. Begin Letter------------ DATE <-- EXTREMELY IMPORTANT TO DATE IT TENANT NAME and CONTACT INFORMATION Dear (use all tenants’ complete names here for professionalism): This letter is being forwarded to you as a notification that as of October 2006 (by the 5th of the October), your monthly rent will be increasing an additional $25.00 per month, to help keep up with the recent rise(s) in property taxes. It will move from the current rate of $XX00.XX per month to $XX25.XX per month. For clarification, August and September rent will remain at $XX00.XX.. In the most unfortunate event that you do not wish to continue living on the premises by these terms, I will understand. But please notify me as soon as possible concerning when you would like to move so that we can make the proper arrangements. If you choose to accept this increase in rent, this letter will be followed by an amended lease renewal agreement. Best regards, YOUR NAME and CONTACT INFO - SIGN IT!!! ------------------ End Letter Next will be their reaction to the increase. Thursday, July 20. 2006When Eviction May Be The Final Option
As sort of a follow-on to the previous post, which introduced the possibility that some Landlords might be playing too nice with their tenants, there are horror stories of bad Tenants as well. Lessons to be learned.
Here’s a quick one from Money Shaker about an exceptionally long term tenant they heard about whose deposit probably got taken for… deposit? Yep. This is a reminder that YOU MUST FIND SOME WAY TO PERIODICALLY INSPECT YOUR PROPERTY. Without being unnecessarily nosey. It’s not that hard to do. For Tenants that show a mixed desire to pay rent (late, partial, deferred, whatever), there’s an obvious problem with their attempts at making good on signed contracts, and there’s an increased probability that they’re eyeing a bankruptcy filing. If they succeed in doing so, it will undoubtedly complicate your life immensely (see here). Not to pile problems on a financially burdened soul, but it isn’t your responsibility to mend their situation. Get that eviction going before the other shoe drops. If you do find yourself in a situation where you feel that a mid-rental-contract eviction is warranted, consult your local authorities (State mostly, but perhaps City, County, or Municipal, depending on jurisdiction) to see if there are any special procedures required to get that ball rolling. Perhaps consider drafting a “Five Day Notice�. After all, the law will only follow a proper paper trail. For a general checklist, here’s a good site. For really extensive public news on evictions (around the world, as much eviction coverage seems to focus on England), go here. That might make you feel better about your situation. Mass evictions on that site, along with references to stories like this one about a North Carolina Congressman and his rather lax, nay, almost vacant form of Landlording. Wow. Here’s what you want to avoid allowing to happen, where courting tragedy for too long had horrific consequences. Sheez, that sounded rather dramatic, didn’t it? Thursday, July 20. 2006Raising The Rent Pt. 1
And for every rule we have a corollary. For the earlier, and ongoing question about how to avoid becoming a Monster-Douche Landlord, there’s the natural counter-question as to whether or not that's just the shiftless road to becoming a Manipulated-Limp Landlord. The other extreme side of the Landlord Possibilities spectrum.
You see, I am currently renting a unit under market. I am knowingly doing this. The Tenant has been there for almost three years under my careful Landlording, and they’ve been living in that unit for another seven years before that. So they’re a solid bet, and a relatively easy rent. No hassles, the checks arrive on time, and the deposits don't bounce. A model Tenant, to be sure. So their rent has been essentially stabilized since I purchased the property. I put a rather high premium on predictability and quality of character. But the more I think about it, the more I wonder whether or not I’m making a mistake. I mean, this unit is renting for a good 20% below market rate. At what point am I crossing the value line? Just how much is that predictability and solid rental history worth to me as a Landlord when property taxes rarely stagnate and NEVER retreat? Where’s my break even? The answer is pretty simple actually. The second I start questioning whether I’m giving too much is probably the point at which I am doing just that. Because rent raising can be such a subjective art form, it’s difficult to quantify the proper net result. Sometimes you just have to rely on your gut (I know, I usually hate that variety of advice too, but that’s the honest truth of it). So I’m going to be raising the rent after a long frozen-rate period. Should be interesting, although I really don't expect any real snags. I plan to document the process thoroughly, here, for the sake of any other Landlords out there who are in a similar situation. Monday, July 10. 2006Why Do The Duplex?
It’s something of a tired subject, but duplexes are pretty hot on the market these days. Sure, they usually sell for less than comparably sized single family homes, but that’s because they’re priced primarily on cash-flow expectations rather than speculative demand or emotional first-time buyers.
So they aren’t that attractive for speculative buyers who want to see huge increases in the paper value of the property. Those who buy and sell, or “flip�, over very brief periods of time are not usually interested in buying used duplexes unless there’s something special about the property (like, super ridiculous crazy cheap, or a natural disaster like Katrina leaves your surviving duplex in goldmine status, which is the strangest blessing ever). Something particularly sellable. Landlords want a property to become profitable as soon as possible, and then wind it up and let it go (hoping that maintenance and repair issues keep at a minimum). Well, if owning multi-unit properties is such a long-view project that involves patience and planning, why are they so popular right now? Apparently, lots of families or friends are joining finances to purchase duplexes instead of individual homes. Other than that, it's hard to say why everyone's diving into the Landlord Game. Not everyone is always so excited about Duplex livin’… But it’s better than renting someone else’s apartment any day. |
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