Lately the thing that has become a bone of contention with almost every tenant is security deposits. Tenants are fighting harder to keep every last dollar even though they may NOT deserve to get that money back.
I have had two recent situations that I would like to discuss. I will give you the rundown of each scenario and then at the end I will explain how each situation was handled.
The first was a tenant who was in one of our properties for over 5 years. When the tenant moved into the property he marked everything on his move in report as in "GOOD" shape. Also during the last year of his tenancy we replaced the carpet for him because the others were just getting too worn out. Upon doing the move out inspection we noticed that he did not clean the property after leaving and also that the carpets were not cleaned. We had both of these things done and billed them too his deposits as it states in his lease.
After a few weeks he began writing nasty letters and stated that "he didn't need to clean anything because he did not have a cleaning deposit". This claim brings up a topic that I get asked a lot which is..."what can I charge the tenant for?" In our leases we are very specific that the property be left in the original condition less normal wear and tear or we can charge it to your deposit. We even go one step further by putting a clause which states the carpets have to be professionally cleaned or we will charge you for that as well.
The second issues that came up recently was when a tenant moved out of a property after 3 years. They were model tenants that always paid on time and if there was a repair they would just take care of it out of their pocket. When they move the property looked to be in immaculate condition, and the owner did not have to do any repairs (which is extremely rare). Our leases state that the tenants pay the 1st $25 of any repair. In this tenants case he did call in two repairs that were beyond what he could do, so he had an outstanding balance of $50 which he did not want to have to pay for.
In SCENARIO 1 you had a case where the tenant clearly did not feel accountable for anything. The owner was so disgusted by this that he wanted everything charged to the tenant and said that he would pay whatever costs it took to fight the tenant.
In SCENARIO 2 the owner took into account the quality of the tenant and the fact that the tenant saved the owner a lot of money over his three years by keeping up with the repairs.
This can be a learning lesson for both tenants and landlords.
For tenants, make sure you pay your rent on time and take care of the property. Making the $2 repair without calling and keeping the house in great shape goes along way. It is a lot easier to waive some costs to you when this is done properly.
For landlords, make sure you have a lease in place that spells out the tenant’s responsibilities. It is so easy for tenants to try and use the excuse that "no one ever told me that". Also ALWAYS make sure that you have plenty of photos should you have to fight about this in front of a judge.
Below is a slide-show of what the property looked like when the tenant moved out. Keep in mind that he felt that the property was left in good condition.
The following may not be what you want to hear but it is the TRUTH!
I get the following phone call about once a week.
"Hi, my name is ______ and my Realtor has been trying to sell my home for ___ months without success. He suggested that I rent it out until the market gets better. What do you think?
Now I am grateful when we get a referral because it usually means someone trusts you and I always take that very seriously.
The problem is that every person is not made to be a landlord. There are a couple of things that most people do not tell you up front that you need to be aware of before making this major decision.
This is what I usually tell people:
As you make the decision to become a landlord you have to cut all personal ties to the property. You can't think of the guest bedrooms as the place your kids grew up, or the kitchen as the two year remodel that came out perfect. If you happen to drive by or do an inspection and see that the occupants are not living in the home exactly how you did...you have to accept that (deep breath). DO NOT CONFUSE THIS WITH ACTUAL PHYSICAL PROPERTY DAMAGE. I am simply talking about messy rooms, dishes in the sink, or the overgrown grass in the backyard. Too often people get hung up on the fact that the home doesn’t look the same as they remember it. If you cannot take the emotional connections out of the equation then you should not be a landlord.
Make sure that you have AT LEAST 6 months of mortgage payments (if not more) in savings to cover any vacancies, repairs, etc. If you are counting on the rent check alone each month to cover the mortgage payment then you should not be a landlord.
Be prepared...renters may not pay and/or a major repair or damage could occur. Like any investment there will be ups and down. If every tenant stayed forever, paid top rent, and never need repairs, then everyone would be a landlord. The fact of the matter is that issues/hardships will come up and you need to be prepared to deal with them.
Now a lot of this is easier said then done, and I realize that a lot of people are being forced into being landlords. That is why it's important to hire a reputable property manager that with oversee your investment and collect the proper deposits to try and mitigate your damage should something go wrong.
If you or someone you know wants to discuss this further please contact me.
In my opinion not every home needs a home warranty.
For example, if your home is brand new then you probably get a builders warranty for at least the first year. If you purchase a resale home then it may make sense in cases to look into purchasing a home warranty. Some Realtors and clients swear by home warranties. I tend to lean in the other direction.
In my line of work I have often seen the warranty company either not cover everything that they said they would or make you jump through so many hoops that it is not worth it. An example of this is a client owned a home built in 1959. From about 1994 she started using a home warranty. Every year she renewed this until she finally sold the home in 2009. During that span of time she had two big ticket claims. One was for an a.c. unit and the other was for a furnace.
Most people reading this are probably thinking "she got her monies worth then". At first glance I would think the same thing, but upon taking a closer look at the numbers below you can see what a bad deal she got.
15 years at an average of $400 per year equals $6000. Even $6000 over a long period of time would be ok, but then comes all the other issues. This a.c. was clearly at the end of it's life in 2004, yet they still refused to replace the unit. It took 11 more service calls at $55 a piece before they finally agreed to install a new unit. This added up to $550 on top of all the time and frustration wasted trying to get them to do what they promised in their initial contract. When it got replaced they installed a smaller unit based on square footage only and didn't take anything else into account. To top that off they made the client pay for the crane. This cost the client over $1000. By the end it cost my client spent around $8000 for coverage that I could have paid $4000 for.
I would only recommend getting a home warranty in a few occasions. The first is if you don't have the money to cover a major expense like an air conditioner or heater. The second is when your buy a resale home and the seller is willing to add that in as part of the purchase contract at no cost to the buyer. The reality is that you can find more reliable vendors through friends or networks like Angie's List!
Of course, this is just my opinion on the topic. If you have any examples (good or bad) that you would like to share I would love to hear them!
For awhile I have been toying with the idea of creating a book based on the funny situations I have experienced while managing properties. These are the types of things that take place and leave you asking the question...DID THAT JUST HAPPEN???
Instead of trying to create a book I have decided to share some of these stories on my blog. This first story is probably my favorite. It is the prime example for tenants who will do everything they can to stay in their property (besides pay their rent). Around 3 years ago, we placed a tenant in one of our properties. She has great credit, excellent references, solid job history, income, etc.
The one issue that caused some concern was that she was in the mortgage industry which at that time was at the APEX of instability. Everything was going fine for a few months, and then BOOM...she couldn't pay her rent.
Most tenants in this situation will offer to pay some of the rent if we can work with them. Not this tenant. She always promised to come in tomorrow with the entire amount. This went on for the entire 50 days it took to get her out of the property. 50 days is a key number here because usually it never takes that long.
The last part of the legal process is to serve a "Writ of Restitution" which basically lets the tenants know that they are being evicted and possession is being given back to the owner of the property. When the constable went to the property to serve the Writ, he could not find the address anywhere. We kept explaining were the property was but he explained that the address was incorrect and that he could not serve them the notice.
We immediately sent a representative from our office to the property and could not believe what we saw. The tenant, in an effort to avoid being evicted, had glued another hand made address plate over the existing one. We had to send all the data back to the court and it allowed the tenant to stay for an extra 7 days.
It seemed we were not the only victim either. When I went to check the water box in the front yard she had filled it with rocks and inside was a note asking the water man to "Please don't turn off the water" and promised "I am on my way to pay right now". Needless to say she also left a huge outstanding water bill with the city.
It just shows that you can screen people up and down, yet if they really want to deceive you they can. This person clearly knew what she was doing, and it is very sad because it caused nothing but trouble, stress, and major expenses to the owner.
When homeowners associations were originally developed it was mainly because they wanted to keep communities looking nice, maintain value in the surrounding properties, and enforce the CC & R's (Conditions, Covenants and Restrictions).
I for one enjoy living in an HOA, even though I still have my frustrations. For example, I wanted to have the exterior of my house re-painted to the same colors as my neighbor one street South of my home. To do this I have to submit a form, as well as the name of the contractor, paint colors, brand, etc. I submitted all of this over two weeks ago and still haven't heard anything. Despite the fact that I am the most impatient person I know, I have remained relatively calm. I contacted the office and after several attempts to get in touch with my community manager, an assistant of his returned my call and informed me that I will have to wait another three weeks for the next HOA meeting to approve my paint request. I wanted to scream! Being a property manager I understand that he doesn't make the rules, but it was still very frustrating.
Sometimes, in my mind (and the minds of a lot of my clients) HOA's become more interested in going on a "witch hunt" then helping to provide support for the owners that are paying their salaries. They scavenge through their communities in hopes of writing someone up on the most petty violation. This should be a major concern for home owners, and I won't be surprised if you see a major uproar in the next few years against HOA's. The power seems to have gone to their head!
Here's another example, in March we saw a ton of rain in the valley. Not just a day here and there, but it would rain 3-4 days consistently, take a short break and then rain 3-4 more days in a row. Combining this with the constant sun led to a major weed issue valley wide. Rather than drive the neighborhood and think that "wow, it has been raining for almost 10 days straight, so it must be hard to pick weeds right now" these HOA's used it as a way to once again "flex their muscle" and issue a huge amount of notices. During this period we received over 40 notices pertaining to weeds (we usually get about 5). The worst part is 5 of the properties had landscaping services on them. The problem is you can't landscape a wet yard!
I actually called a few of the HOA's personally and tried to explain that it would be impossible to pull the weeds, or at least very inconvenient. All but one of the HOA's got very defensive and were quick to point out that they could send a violation notice after even just 1 small weed pops up. Again they were quick to exert their power and put me in my place. The sad thing is that this has been my experience with a lot of the HOA's that I deal with on a regular basis.
I am worried that the only way these people will see the light is for communities to start removing them altogether. As much as they bug me s, I still believe that they are an important ingredient to the recipe for a great community. I just feel that they also need to have a better way of interpreting each issue that is both reasonable and fair for everyone.
For now, I am just forced to humbly call them and beg for there mercy so that my clients can stay out of their crosshairs.
Realtor, Property Manager, New Blogger