Always charge a security deposit when you have tenants move into your property. Avoid the “move in today with no deposit required” sales pitch because security deposits are really important. If a tenant balks at paying a deposit or wants it divided up into three different payments over a few months, I would continue looking for a better tenant. It’s always a concern if a tenant does not have the financial resources to pay for a security deposit and the first month’s rent.
What do you charge?
Our policy is to charge the equivalent of a month’s rent. So, if one of our properties rents for $1,200 per month, we are almost always going to charge a deposit of $1,200. We rarely, if ever, discount our security deposits.
Where should you store the deposit?
It’s important to set up an account where security deposits are the only thing in the there. As a professional property management company, we never want to co-mingle our owners’ money and our money. Since the security deposit is considered the tenant’s money until the end of the lease, we hold it in a separate account that only has security deposits in it. Check out your state and local laws. If it’s an interest bearing account, some states require you to provide that interest to the tenant when the deposit is returned.
How do you disperse the deposit?
Again, it’s state-driven. In Indiana, we have 45 days to return the deposit in full or provide a letter noting what deductions were made from that security deposit. If you’ve paid attention to my previous blog on wear and tear, this is where that information because extremely important. If your security deposit is $1,000 and you feel like the tenant did $200 of damage outside of wear and tear, you’ll need to refund the $800 within 45 days and provide documentation on how that $200 was spent.
Security deposits are important and there are a lot of laws surrounding them. It’s important for landlords to be up to speed on what’s happening with requirements. If you have any questions about your security deposits, or you need help setting up a system and an account for your security deposits, please contact us at T&H Realty Services, and we’d be happy to work with you.
Today we are talking about vendors and emergency maintenance. If you are a do-it-yourselfer, that’s great. You can save yourself a lot of money. You can paint, take care of cleaning and maybe do any small repairs that are easy to manage. That’s assuming you have the time to do it. There are professionals out there who can do that work for you, but if you’re interested in saving money you can do it yourself.
If you’re like me and a lot of other landlords, you need help to make your property ready and to keep up with repairs. I strongly suggest you make connections. Talk to other landlords you know and find out who they use. Conduct a search on Google to find professional vendors with good online reputations. It’s very important that every single person you allow in your home has the proper insurance. Make sure you see proof of insurance on anyone you allow into your home for work. In many cases, these maintenance personnel will need to be licensed as well.
I always recommend avoiding Joe down the street when it comes to plumbing work. Unless he’s a licensed plumber who carries insurance, you don’t want him working on your rental property. A lot of people think they are plumbers, but if your plumbing fails and results in water damage or mold, Joe will probably not be able to take care of that damage. You’ll have larger problems than the initial plumbing fix. Specialized work like electrical and HVAC systems need professionals with property licensing. The liability in those situations is just too great.
Emergency maintenance vendors have to be in place. Hopefully, you won’t need to use them very often but you have to know who to call. When your tenant calls you at 4:00 a.m. and the basement is filled with three feet of water, do you know who to call in that moment? You need to have someone who can get out there quick and take care of the problem. You can’t wait around on something like that.
As a professional property manager, we have established great relationships with local vendors who carry the licenses and insurance that is required. It’s great to have those relationships because we’re right there at the top of their list. We are often our vendors’ largest customer, so when we call them, they react very quickly. They also provide extra eyes and ears on our rental homes. They let us know right away if something doesn’t look right.
If you have any questions about how to handle or hire maintenance vendors, please contact us at T&H Realty Services, and we’d be happy to talk to you a little bit more.
If any of you have listened to my previous blogs, you know that I believe tenant screening is the most important function a property manager can perform. Basically, it’s because past performance is the best indicator of future performance. If you screen someone and they prove to be very highly qualified, they will likely be a great tenant for you as well. Unfortunately, there are exceptions. People lose jobs, divorce and illnesses happen and sometimes very qualified tenants all of a sudden go south very quickly.
Nothing is guaranteed. However, generally speaking, when someone screens well they will make a good tenant. A credit report must be reviewed. There are a few hoops you have to jump through in order to run credit on someone if you are managing your own property. I recommend that you not accept a credit report that an applicant brings to you. That can lead to difficulties for you. Some tenants will avoid a property they know is professionally managed when they have bad credit. Those tenants will go to a property that is being managed by the owner because they’re hoping their credit reports will not be checked. So, always check credit.
Criminal background checks are imperative. You need to know what kind of person is moving into your home. Do a thorough verification of wages. Ask for pay stubs and make sure that person qualifies from an income and financial standpoint.
Always talk to current and previous landlords. If they have paid rent on time in the past, they will probably pay rent on time for you. The trick with landlord references is to make sure you’re actually speaking to the person who the landlord is, and not someone posing as a landlord. Unfortunately, that does happen.
Have a consistent and written credit policy in place. For example, you can say you won’t accept any tenants with a credit score lower than 600, or you won’t accept anyone with a felony record in the last 10 years. You have to be consistent across the board. Fair housing laws are important and they must be followed.
We have found that screening can be complicated for landlords, but it’s very important. You can have a property manager take care of the screening and the leasing and then take over the management on your own once a tenant is in place. That might be a good option if you want to manage your own property, but you need help with the tenant screening.
If you have any questions about screening and getting a good tenant in place, please contact us at T&H Realty Services.
Most late rent payments can be avoided altogether with proper tenant screening. Any applicants you consider for your rental property should be thoroughly screened. Confirm with current and former landlords that rent was paid on time every month. You also want to look at an applicant’s credit report to ensure bills are paid regularly and always check income, so you’ll know if a tenant earns enough money to pay rent.
Things happen and even well-screened tenants can have problems with illness or major unexpected bills and rent might be late. You want to make sure you have things set up to ensure you can collect late rent effectively. It starts with the lease. Make sure you have a defined date that rent is due spelled out in your lease. You should also include information on when rent is considered late. For example, perhaps rent is due on the first of the month, but then there is a grace period and on the sixth of the month it is officially considered late.
Include penalties so tenants know exactly what kind of late fees they will need to pay when rent isn’t on time. Have an initial penalty, maybe $25, and then increase the penalty every day that rent continues to be late. I think it’s a mistake just to charge the one-time penalty because then tenants have no motivation to get you the late rent any quicker. Make sure you have these procedures in writing.
If the sixth of the month comes and there is still no rent payment, make a phone call to the tenant or send a letter. When you talk to the tenant, it is critical that you get a promise to pay date. Document when they will pay and how much they will pay, including late fees. If they don’t pay or you can’t reach them, send a Pay or Quit Notice. Most courts require these before you file for eviction. These are generally posted on the door and they require rent to be paid within a certain number of days.
Through these efforts, a tenant will pay most of the time. If they don’t pay, eviction is inevitable. Should you find yourself at that stage, I recommend hiring an attorney. Real estate attorneys are not overly expensive and they know the right paperwork to file. It can be a huge asset to have an attorney taking care of this for you, because you don’t want to do something incorrectly and have a further delay in getting a nonpaying tenant out of your property.
If you have any questions about how to effectively collect late rent, please contact us at T&H Realty Services.
If you took a poll of landlords and property managers and asked them what their greatest challenges are, they would tell you that dealing with security deposit issues and wear and tear are the greatest challenges. That’s because the definition of wear and tear is not always clear and people have different interpretations. When someone moves out and work needs to be done on the property, someone has to pay for it. The tenant will have one perspective about what they are responsible for and the owner will have a very different perspective.
We can start with the textbook definition of wear and tear, which is: The physical deterioration which occurs in the normal course of the use for which a property is intended, without negligence, carelessness, accident or abuse of the premises by the occupant, members of the household or guests. So, there is some guidance on the issue. If large holes are left in the walls after a tenant moves out or a carpet has been burned or ripped, you can argue that negligence has taken place.
Some issues are vague. For example, if there are scuff marks on the walls, holes from hanging pictures or the carpet is worn in some places, are these things the owner or the tenant is responsible for?
We recommend two specific things. First, define and write down what your local ordinances or courts say is normal wear and tear. If judges in your area have ruled that carpets have a seven year life, write that down. If they have ruled that holes more than ¼ of an inch would be a tenant’s responsibility, write that down. Use those documented practices w hen distributing security deposits. Write down all of your criteria so that if you ever find yourself in court, you can produce your documents and hopefully work something out.
We also recommend communication. All of your requirements and definitions of wear and tear must be communicated to your tenants. If you want all the carpets steam cleaned before the tenant moves out, put that in the lease. If you expect the tenant to hire a professional cleaning crew to clean at the end of the tenancy, put that in the lease too. When notice is given by the tenants, it’s a good opportunity to remind them what they agreed to do. You can re-introduce them to the requirements in the lease.
If tenants know you have reasonable expectations and you communicate those expectations at the beginning and end of the lease, those tenants will abide by your rules and do what they need to do because they’ll want their security deposit back. Challenges are inevitable, but they will diminish when you have good policies written down.
If you have any questions about wear and tear or anything pertaining to property management, please don’t hesitate to contact us at T&H Realty Services.
There are a couple of questions you should always ask before choosing a property management company. Generally, the first question we get is – what are your fees? That’s an important question to ask, however there are a couple of things to consider when you are comparing fees. Some property management companies will charge you one flat monthly fee. Other property management companies will charge you for each service. Some companies will charge a leasing fee, some will charge a set-up fee and some will charge a monthly marketing fee. I think that in general, most companies charge the same amount; it’s just that the fee structure is a little bit different. What you need to remember is that you really want to choose the right property management company, even if it means spending a couple of extra dollars.
First, find out if the principals or the owners of the company have their own rental real estate. I think they should. I believe an important part of being an effective property manager is having that grassroots experience of dealing with tenants one on one without staff to help you out. A property manager has the perspective of a property owner will be better able to serve you. He or she will also be more efficient and better equipped to handle whatever situations or issues may arise. Property managers with experience as owners will be able to help you make decisions involving your property. I think it’s an important quality for your property manager to have. So, find out if that experience is there when you start interviewing different companies.
Another important question you will want to ask is about communication. Find out how the property manager will communicate with you. I take calls every week from people who are frustrated with their property managers because they cannot get a return phone call. That should never happen. There should be multiple ways to reach your property manager. You can use email, voicemail, text messaging or software that will help you communicate with each other. You should never find yourself waiting for a phone call. If you are, call another property management company instead.
If you have any questions about the criteria you should use when selecting a property manager, or you would like to talk about the services we can provide, please contact us at T&H Realty, and we’d be happy to answer your questions.
Many people often ask me about how long it takes to lease a property and what needs to be done before it can go on the rental market for a tenant to find. There are a few things you can do to ensure you rent your house fast.
First, prepare the property the right way. Walk through it and make sure it is clean. Take care of any repairs and maintenance that are needed. For example, if you notice the kitchen sink is dripping, fix it. The tenant will not like moving into a place with a dripping sink, and it will be an issue when people come to see the house.
Make sure the landscaping is in good shape. Take a look at the land and the yard, and make sure it looks neat, clean and appealing. The way the house presents is important because first impressions matter. You don’t want someone to decide against renting your house because of how it looks. Take the time to clean it up, make the necessary repairs and update the landscaping. If tenants are visually turned off by a property, they will move to a different one.
Price the property correctly. Some property owners might understand when I tell them a good price for their property is $1,000 per month, but they might want to start a little higher, at about $1050 or $1075. The mistake there is that the people looking at the house will know it’s overpriced. They are visiting other properties, so they will pass on your house and rent a similar one that is appropriately priced. Pricing your house too high will cost you money. A vacancy is far more expensive than a $50 price reduction. One of the best ways to lease your house quickly is to go on the market with the right price.
Always answer your phone. When you are marketing and advertising your property for rent, you have got to be available to take phone calls and set appointments. A lot of qualified people might just move on to other properties if you do not answer your phone. It is important to be accessible.
You also have to be prepared to show the property. This becomes a problem for some people with difficult schedules. You will have potential tenants wanting to see the place in the evenings, on the weekends and sometimes in the middle of the day or the early morning. Your schedule has to be somewhat flexible so you can get people into your house to look at it. Just like missing a phone call, if you aren’t there to show your house, you cannot expect to rent it quickly.
When you are able to do these things, you will find you can rent your house quickly. If you keep it looking clean and presentable, you make sure you’re available and you price it correctly, you should be able to get that place leased in 30 days or less. If you have any questions, or need help getting your property on the market and rented, please contact us at T&H Realty.
As a full service property management company in the Indianapolis area, we wanted to spend a little time giving you the 5 best reasons to work with us at T&H Realty for all your property management needs.
We are a trusted local real estate company with a lot of expertise. Our staff has over 50 years of combined property management experience. We don’t just work in this market, we live here too. We leverage our expertise every day for our customers, and there is a lot of knowledge and skill to benefit from.
We know how to maximize your asset. We know the rental market in and around Indianapolis very well. Our up to date and detailed analysis and study of the market helps us to get top dollar for your rental property. Our marketing plans also ensure that we can bring together the largest possible pool of potential renters for your property. We will make sure we get a highly qualified tenant for you, and we’ll price your property correctly so you don’t have to worry about vacancy.
We know how to safeguard your asset. Our company conducts an array of inspections before, during and after a tenancy. We do a thorough move in inspection, annual renewal inspections and another comprehensive property inspection at the time of move out. We also check the property routinely to make sure everything is working and maintained. For example, we will always do an annual check and cleaning of your HVAC system. We make sure your property is taken care of in the best way possible.
We communicate. That may not sound like a big deal on the surface, but I get calls every week from landlords who are frustrated with their current property manager simply because they cannot get a return phone call or a question answered via email. We go to great lengths to ensure we communicate well. We do a lot to make sure our customers know they are a priority.
We are more than just a property management company. If you want to add to your investment property portfolio, we can help you do that. We have local real estate agents on staff who can help you buy and sell investment properties.
We are proud of the service we provide, and if you have any questions or would like to learn more, please contact us at T&H Realty.
For example, if you have a brick-sided 1920’s bungalow, you will have to expect higher maintenance costs than if you own a 2010 vinyl-sided home. Age plays an important role in how much your maintenance and repair costs will be.
In addition to the age of your home, the type of property you have also matters. For example, condos often have their exterior maintenance expenses paid for by the association. Therefore, as a condo owner you will not have to worry about outside paint or putting on a new roof.
Generally, you should plan to spend around 20 percent of your rental income on maintenance. That sounds like a big number and you might worry because you need 100 percent of your rental income to cover your mortgage. I understand that and it’s a concern a lot of landlords have. You have to ask yourself before becoming a landlord whether you are prepared for these types of costs as part of your investment. Maintenance will always be there.
One thing we encourage our property owners to do is to create reserves. That can be difficult, and we understand. However, a reserve account will help you pay for maintenance or cover the cost of vacancies. You could go two or three months without having to spend anything on maintenance issues, and then something big will happen and you’ll need a new roof or a new furnace. These big ticket items will need a healthy reserve so you can pay for those expenses.
We encourage owners to set up an account and peel off some of that income every month to pay for those things.If you conduct routine preventative maintenance, you will have a good shot at keeping your maintenance costs low. Check your HVAC system routinely. We always tell our owners to have the air conditioning unit serviced in the spring and the furnace looked at in the fall. Get a licensed technician who can point out any potential problems that could be an issue down the road. It is much easier to pay for a maintenance service than it is to pay for an emergency service. If your furnace goes down on a Saturday night in the middle of winter and your tenant has no heat, that will be an expensive repair to make and you will have a tenant who is upset. Another maintenance item we suggest is gutter cleanings to help keep water away from your property. A flooded basement is another expensive repair that you do not have to worry about.
You might have a lot of questions about how to plan for maintenance costs as a landlord. Please contact us at T&H Realty if you need more information.