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.
Realtor, Property Manager, New Blogger