TheLandlordBlog.com

Today’s carnival of real estate investing has been posted at Gold Medallion Homes.  There is some interesting reading this week as always.  Check it out and be sure to submit your own post to the carnival this week if you write for an investing-related blog.

This week the carnival of real estate investing was hosted by Eric over at The Millionaires Blog.  There were quite a few bloggers involved this week and some good reading indeed.  Check it out.

If you have a blog, please consider getting involved in our carnival.  It’s open to anyone!  The more bloggers that get involved, the more we can bring all of those hidden real estate investing blogs into the limelight.  There are plenty of them out there, they are just cleverly hidden in the blogosphere.

It happens every year.  Every year I get cited by the city for something at this one particular property.  It’s located right downtown where there is a lot of foot traffic, so the city watches the grounds, the upkeep of the building, and particularly, the sidewalk in the winter.

They cited me last year for peeling paint on the window frames of the garage.  My property manager took photos of the window frames and we sent them to the city as we challenged the citation.  They dropped it.

Last year they also cited me for allowing ice to build up on the sidewalk.  Local ordinance says that you must keep public sidewalks free from any obstruction or hindrance at all times.  They had a date on the citation of when they saw the ice on the sidewalk, and my property manager insisted that there was no ice and that he had been keeping up with the shoveling and salting.  I checked the precipitation history with weather service and found that there wasn’t any snow or rain within the timeframe of the date of the citation.  I lost that battle and later my property manager was fired for a pattern of neglect.

This week I received another snow removal citation for the same property.  This time there it includes a photo with a date stamp on it.  Sure enough, there is packed snow all over the sidewalk.  Someone could easily slip and fall, a wheelchair would have a hard time making it through, and when it starts to melt it will turn to ice.  Big problem.

The thing is, each tenant in this building has agreed to keep the sidewalk shoveled.  There are 8 people living in the building.  Each one believes it is his/her job to shovel, so we have 8 layers of redundancy to get the job done.  We provide shovels and salt and they sit handily by the entrances.  The final layer of redundancy is the property manager.  He knows the tenants have been told it’s their responsibility, and that it is his responsibility to enforce the rules.  If they don’t shovel, he needs to remind them of what they agreed to.  Ultimately, if nobody shovels he needs to do it so we avoid a citation.  So my 9th level of redundancy failed also.

What do we do to prevent this kind of headache and the expense?  The expense is easy to eliminate.  We’ll bill out the tenants for the $114 citation.  Split between 8 people, it’s $14.25 each due with next month’s rent.  A copy of the citation and photo can be provided if necessary, along with a copy of the tenant house rules that were signed with the lease.

As a landlord, you will have these kinds of headaches.  We can attempt to prevent them by setting clear expectations with tenants and putting these expectations, along with consequences, in easy-to-understand writing.  The tenants definitively know that they need to shovel.  They know that if they don’t, and we get a citation, they will be billed for it.  It’s all spelled out as a line item house rule in their lease addendum.  The property manager is the final safety net.  Either he can enforce the rules or enforce the consequences, or he can prevent the consequences (and perpetuate the laziness) by doing it himself.

As the investor, what is the headache quotient I suffer in this situation?  Very minimal.  I have tight leases and a property manager in place to filter most of the headaches from ever reaching my awareness.  Some of it reaches me.  I receive all the mail that comes from the city.  I received the citation so I am aware of it.  I posted a message in the online workspace that I use to communicate with my manager letting him know of the citation.  I expect him to take care of it from here and I won’t need to think about it again.

Is this one of those “tenant headaches” that landords and would-be investors speak of?  Yes.  Is it bad enough to consider NOT investing in rental properties?  Definitely not.  This is simple stuff.  Part of the package.  Easily remedied when viewed as a simple task that takes mere minutes to execute.  I haven’t found a way to make money yet that involves zero headache.  It’s just part of life, and we can minimize our headache quotient quite a bit by how we set expectations, how we handle the situations when they arise, and how we view the magnitude of the problems when they occur.

As an investor, once you have many properties and many units your income is diversified.  If you have some vacancies, your payments are covered by the other units that are filled.  If you bought right, you have plenty of cash flow to cover vacancy loss, because this was figured in as part of the overall evaluation criteria.

We must be careful to not take this for granted, however.  It is amazingly easy for investors and property managers to become complacent.  Once we know we have cushion to deal with, somehow urgency slips.  We buy properties and don’t rent them right away.  We know someone is moving out and we don’t advertise in advance of them leaving.  We start the eviction process and don’t time the re-rent properly.  Pretty soon your cash flow is gone and you can be in trouble.  You have to start dipping into personal funds to cover payments.  You sit on pins and needles hoping the unexpected maintenance doesn’t happen.

What causes this complacency?  Lack of discipline?  Lack of systems?  Being unorganized?  Denial?  Not enough time?  Enough money coming in so we get fat and happy and don’t care anymore?

I’m not sure what the reason is, and I’m certain it’s different in every circumstance.  We can guard against this loss of cash flow by remembering that investing is a business.  We need to have systems, processes, people, backup plans, and schedules in place that protect our profitability.  We cannot leave our business up to chance.  We cannot count on “feeling like it” at any point in time.  We cannot allow our tendency to procrastinate to affect our bottom line. 

We need to take many of the human flaws out of the equation as possible, and supplement our role with back to the basics, good ol’ fashioned business operations.  Without it, we are hobbyists realizing hobby-level results.

This week’s carnival of real estate investing has been published at Real-Real Estate Investing.  There are some good articles this week, worthy of a look-see.  Check it out.

If you’re a blogger, please consider participating in the carnival.  It’s great fun and there are several benefits to submitting posts and hosting.  The REI community wants to find your blog and hear from you!

I’ve been writing over the last several months about my neighbors who moved out, rented their house out, evicted their tenants, and now have their house for sale.  They are new to real estate investing, and went into it without any education and a fear of failure. 

One could say that what you focus on expands, and they have had some degree of failure with their first investing experience.  Their tenants trashed their house, stole their refrigerator on their way out, and still owe them thousands of dollars.  They chose a bad property management company without calling references or doing any research.  The company didn’t do them any favors in selecting a screened tenant or in handling the situation once problems began. 

These very tenants moved into the rental house right next door to the house they were evicted from.  I watched them move and saw them take the refrigerator from one house to the next.  This week the tenants are being evicted from the house next door.  I would imagine they simply repeated what they did to my neighbors.  They probably paid their security deposit and first month’s rent in order to get in, and then didn’t pay anything further.  They’ll lose their deposit due to owed rent and so essentially lived in the house for three months for the price of two. 

If you don’t mind moving around every few months, this is a technique to get 30% off of rent for life!  And this is worst case scenario because many investors and property management companies don’t act quickly to get non-paying tenants out (my neighbors and their company waited a while).  Professional tenants could live free for some time before having to move on.

The owners of this second house apparently did not do tenant screening when renting to these pros.  If they would have called the landlord reference, they would have learned what was happening with the eviction and could have saved themselves some money and hassle.  This was an amateur move on their part, and once in a while you can get lucky and come out ok, but they were unfortunately up against professional tenants.  These tenants have perfected their system and can now move on to the next amateur investor, of which there are plenty.

Meanwhile my neighbors’ house sits empty with a for sale sign out front.  They were so disenchanted with their rental experience that they want no part of it anymore.  They want to sell and be done with it.  The only problem is that the market isn’t moving right now.  Not unless you’re having a fire sale.  Their house will sit there for sale for some time.  Money continues to flow out every month as they make their mortgage payment.

So it strikes me as interesting that we have the amateurs vs. the pros here.  You’d think the investors would be the pros.  They would have done their research, eventually they would have plenty of experience, and they would have learned how to prevent and solve issues.  They would be investing as a business activity, with the financial aspect being a key operating component.  The objective is, of course, to make a profit. 

The tenants you would think would be on the amateur side of the continuum.  They presumably would have a limited number of rental experiences under their belt and would not be predisposed to “working the system.”  In this case, as is possible with any combination of investor and tenant at any time, the roles are reversed.  Interesting.

This week’s edition of the Carnival of Real Estate Investing has been posted at Salt Lake Real Estate Blog.  Nigel got creative with an olympics theme this time and there are some great posts to read.  Check it out!

If you’re a blogger, won’t you consider getting involved in the carnival?  You can volunteer to host it one week, or you can just submit one of your blog posts each week and watch the traffic to your site increase.  Visit the carnival site to see how you can benefit from participation and have fun at the same time!

Today’s edition of the Carnival of Real Estate Investing is now posted at Real Estate Perspectives.  This week we have quite an entertaining read, with our host playing up an entire baseball theme.

I’m third up to bat and playing left field.  Always wanted to catch one of those super high major league fly balls.  I remember doing that as a kid and the impact of the ball hitting your glove when you catch it sure stings, but the sting is erased by the fact that you actually caught it!

Enjoy the carnival.

I will never do Section 8 again! I know some people love the program and believe that the supposed “guaranteed” rent is worth it, but not me. I just had a very long time Section 8 tenant that I inherited with a building move out. Finally. We could have evicted her many times for violating the terms of her lease, but we never did because we knew her apartment would need to be completely rehabbed after she left. Well, that day is here.

She gave written notice in November that she’d be moving out the week before Christmas. Contractors were lined up, and we had a verbal committment from a new tenant for January 1. Of course a few days before the move out date, Section 8 Cindy calls to say she’s not moving out right now after all because her new apartment is not ready for her yet.

My property manager told her this was fine, as the January 1 tenant didn’t appear to be panning out anyway and this would give us a little more time for the contractors to do their work. It was the holidays after all.

So Section 8 Cindy moves out mid-January. It was made perfectly clear to her social worker that we would not be prorating the rent. They’d pay for the full month. Also discussed was the condition of the apartment and what would be expected upon move out. The place was trashed and we wanted the county to chip in for part of the rehab expenses. The security deposit was not going to make a dent in the expenses required to bring the unit up to rent ready again. The social worker said that we could work something out and agreed to oversee the move out and the subsequent cleaning.

Well, three social workers later and post move out, here is what we have. We have a lovely medicine cabinet full of personal effects. I can’t help but notice all of the deoderant that is being left behind. This might be related in some distant way to the fact that the bathtub has been full of laundry for the last x number of years. Yep. That means no bathing. And the deoderant is piling up and is seemingly not wanted enough to take it along upon exit. Hmmm.

Then we have the rest of the bathroom that has been “cleaned.” You must understand this really is clean compared to how it looked before. She gets an E for effort but $0 in credits toward getting her security deposit back.

Behind door #2 we have the kitchen. The refrigerator has never been cleaned, and now certainly wasn’t an excuse to do it for the first time.

Let your eyes wander to the kitchen cabinets and walls and you’ll see a full array of food splatter that reaches proportions beyond the wildest cooking I’ve ever done.

Also note the condition of the floor where the table used to be.

Finally, back out in the main room we see a small sample of the furniture and garbage that was left behind.

The current social worker has indeed been to the apartment and has confirmed that it is cleaned to her satisfaction and that a full refund of the security deposit is warranted. It’s a classic case of the blind leading the blind. I charge $50 if a mere coat hanger is left behind, not to mention furniture, trash, food, feces, and years worth of dirt and grime.

Apparently the conversation about the county sharing in the rehab expenses was not passed along to the latest social worker. There has been no consistency, no action, and no educated response to anything we’ve put into the black hole of the county Section 8 establishment.

The rehab work is underway and I should have some new photos of it and a breakdown of money spent soon.

Josh at Bigger Pockets hosted this week’s Carnival of Real Estate Investing this week and… drum roll please…

he liked my tip about the landlord locks! Thanks for the recognition Josh. It is a great tip and I’m having two more of those locks installed this week.

Be sure to check out the carnival for a bunch of other great real estate investing articles and please, get involved if you’re a blogger. We’re all at the edge of our seats waiting to hear what you have to say!