10 Traits of Terrible Tenants

All it takes is one bad tenant to hijack a year’s worth of profit.

This hard reality encourages landlords to be extra diligent, screening prospective tenants and looking for the subtle signs that could indicate a potential nightmare in the making.

Here is a list of ten warning signs that could save you a lot of grief:

1. Your prospective tenant does a lousy job filling out the rental application, leaving noticeable gaps, instead of carefully providing accurate and complete information.

2. The tenant is leaving the current rental property mid-lease.

3. They pass off a friend as a landlord reference.  Clearly they’re hiding something.

4. The tenant asks if they can pay the rent in cash.  Run like the wind from this one!

5. They talk about roommates, but want the lease to be only in their name.

6. The employment history has unexplained gaps, and references are seemingly unavailable.

7. They ask about working on the property, in partial trade for rent.

8. The tenant wants to give you their rent deposit in several payments.

9. Trying to negotiate the rent down to a cheaper price, without a good reason.

10. The information they fill out on their application doesn’t match their Previous Address Tenant History (“Path”).

Of course there are more bad traits, and there are always exceptions.  But if you see an applicant with any of these traits, you may want to dig a little deeper.

http://www.american-apartment-owners-association.org/blog/2012/10/15/10-traits-of-terrible-tenants/

9 Mistakes New Real Estate Investors Make

1. Not Knowing the Market Numbers

Knowing your market is as important as any other factor in real estate investing. This means having a neighborhood by neighborhood analysis of the supply curve and average days on market. Both of these data formulas can be found through the assistance of a real estate broker using the MLS.

2. Mistaken Value

Most new investors use Zillow, e-appraisal, or Trulia (or even worse, an average of the three) for determining the value of a property. This is fatal – learn to do a “comparable sales” analysis.

Get your own data, too. Relying on the listing broker to give you comps for properties is like asking the barber, “How’s the haircut?” Learn to find your own comps using public data websites like Trulia.com.

3. Underestimating Repairs

If you have no experience in rehabbing homes, then you shouldn’t be estimating repairs yourself. Get at least 3 difference contractors to give you bids. Get these bids in writing, with detailed breakdowns of labor and materials.

4. Poor Choice of Contractor

A bad contract won’t have a license, will bill you by the hour, and/or won’t work by a written contract drawn by you. A good contractor agreement is essential, have a local attorney draw one up for you. Make sure you get signed lien releases every time you write a check.

5. Bad Contract

Most real estate courses have crappy contracts because they are not written by attorneys. My advice is to learn your local Realtor form and draw up a few addenda. An attorney can help you with this.

6. Wrong Legal Entity

Most investors form an LLC for their investing practices. Is this right? Maybe, maybe not. There any many tax issues involved in choosing an entity that should be review with a tax professional, NOT just an attorney (unless the attorney in question has tax knowledge, like me!).

7. No Marketing Plan

Most investors hire a real estate agent to find them deals and that’s it. There’s not enough good deals on the MLS to make a living on so you need a better plan to market to FSBOs, foreclosures, estates, divorces, and other sources of motivated sellers.

8. No Script

OK, so got a motivated seller on the phone and now what? Uh, uh, uh – what questions do you ask? Have a written script you keep by the phone so you always know what to say.

9. No Business Plan

If you fail to plan, you plan to fail. You’ve heard that before, but how many investors actually write a business plan? The truth is very few. Take some time to write a good, detailed business plan that you can follow as your goal.

http://www.american-apartment-owners-association.org/blog/2012/10/11/9-mistakes-new-real-estate-investors-make/

Investigating Problem Tenants

Eventually all landlords have them – problem tenants.

The problem could be merely late or unpaid rent, but equally as common are complaints from neighbors about noise, smells, trash, illegal parking, or just plain “suspicious activity.”

Here are some tips that owners and property managers should consider as they investigate problem tenants and work to resolve the problem:

1. Start a file immediately. From the first moment you become aware of a problem, start a file. Note every contact with the source of the complaint, the tenant, and any potential witnesses.

2. Seek out the facts before assigning blame. In my experience, wacky neighbors are just as common as problem tenants. You are likely to receive complaints that have no factual support, so don’t make accusations until all the facts are in. If not careful, you could lose a good tenant unnecessarily or expose yourself to legal problems.

3. Investigate carefully. Rather than asking a neighbor if they’ve seen activity that could be criminal or a lease violation, restrict your questions to asking just what they saw without coming to any conclusions. If you take pictures, use the date/time stamp feature on your camera and take pictures that “frame” the location (take pictures at an angle that may include a building number, street sign, or other location marker). Whenever possible, take a witness with you on inspections (NOT a neighbor or another tenant) if you suspect lease violations. Have the witness write and sign a statement of what they saw if violations are actually found.

If you suspect abuse of the property, call in a professional property manager, plumber, electrician or general building inspector – whichever you believe would be appropriate – to witness your inspection and to provide a professional opinion as to the nature and repair cost of the damage.

4. Determine if the problem potentially involves criminal activity. For example, if the complaint is about strange smells, frequent foot traffic throughout the hours of darkness, or general “suspicious activity” – you could find yourself in the middle of a criminal investigation best handled by the police. If you’re not sure about the nature of the problem but want to enter a rental to inspect as part of your investigation, consider asking the police to sit outside while you go in. Some agencies will, others may say they are too busy unless you share a significant amount of evidence with them.

Keep in mind that as a landlord you only need to provide proper notice to enter your rental, in most situations police need probable cause or a warrant. If you strongly suspect that criminal activity is taking place, help the police gather enough information to get a warrant and let THEM enter the premises first.

5. Tie complaints to lease requirements. Every good lease document includes requirements for being a good neighbor. Most have a “house rules” section that restricts noise, requires parking only in marked spaces, etc. We also use an “Illegal Activity Addendum” that says the lease is terminated immediately if illegal activity takes place on the premises. Whatever the complaint, be prepared to tell the tenant how their activity violates a specific requirement of their lease.

Problem tenants are a drag on your time as an owner or manager and will often drive off good tenants in a multi-family facility. Landlords can greatly reduce tenant problems and lease violations by screening rental applications thoroughly, conducting frequent on-site inspections, and taking immediate action to investigate problem situations.

Finally – obtain the services of a professional property manager. Even if you perform day-to-day management yourself, it’s a good idea to have a pro on-call to work with problem tenants, evictions, and situations that you prefer not to handle. A good property manager can give you reliable advice and relieve some of the emotional burden of dealing with problem tenants – even tell you when it’s time to call an attorney.

http://www.american-apartment-owners-association.org/blog/2012/09/27/investigating-problem-tenants/