Collect Higher Rents and Keep Tenants Longer
Keep your Tenants – Your goal is to stand out from everyone else. You want to be different from other landlords in the area. While everyone else does 6 Months or 1 Year leases, you don’t have to follow the crowd. Don’t lock your tenant into that. Besides, if they want to leave, they will. Your goal should be to keep them from leaving without giving you a 30-Day Notice.
Instead, give them something if they stay. If a tenant has already given you a deposit, from the viewpoint of many tenants, they’re not “losing” anything if they leave they just aren’t getting anything back. Some have past experiences where they “already lost” their deposit. However, if you promise them something if they stay, they are less likely to leave until they get their gift.
Free Gifts; Month-to-Month Leases; paying tenants if repairs are not made “in a timely manor”; etc., these things let them know you’re not the ordinary landlord.
Move in Gift – Anything free is good. A free gift, worth twenty-thirty bucks means a lot to a tenant who’s living paycheck to paycheck. My tenants get something:
- A Move In Gift of a DVD/VHS Player. My tenants are thrilled. Most have a DVD player, but now they have one for the bedroom too. Then I tell them about the next gift they get.
- The One Year Gift, which they get when I do my annual Walk Through, is a “Big Screen TV”. (23” Color TV from Wal-Mart for $149) Is it worth $149 to keep you tenant one year? What is it worth to keep them for two? That’s a small expense to keep from having to find a new tenant.
- Three years is worth A New Computer System, which I pick up for $199 from www.TigerDirect.com. Again, this is a small price to pay to get someone to stay two years.
- I haven’t been a landlord four years yet, so this gift has not rolled around, but I have one tenant that I am going to send on vacation soon. For less than $300, I can send this tenant to the beach for a weekend, with accommodations and dinner for two. My tenant already knows he’s getting this and has asked what he gets for 5 years.
In three years, I’ve spent $400 to keep a tenant. If I have one vacant month, it will cost more than that. My tenants are thinking about that next gift.
Month-to-Month – This is the hardest item for most landlords to overcome. “They can leave whenever they want to and I can’t do anything.” All you need to do is keep them from leaving without notice. If you have 30 days notice, you can have someone ready to move in, as soon as that tenant leaves. The landlord is still protected. If the tenant moves out without a written 30-day notice, you keep the deposit. 30 Days is plenty of time to get a new tenant ready to move into your property.
This is how I keep my vacancy rate low. As soon as my tenant says they’re moving out, I start marketing the property. It takes about two weeks to find a tenant. They’re ready to move in when my current tenant leaves. My property is usually vacant just long enough to have someone do a “walk through” and take care of incidentals.
Repair Penalty – Most tenants have lived somewhere that the landlord neglected them and the property. That’s always a fear in the back of their minds. Let your tenant know that you will charge them, if they don’t pay their rent on time, but they can charge YOU if you don’t fix things in a timely manor. For example, plumbing and appliance repairs should be 24-48 hours. Electrical and HVAC repairs could take 72 hours. Don’t get scared, if it takes longer, you’re covered.
IF the repairs are going to take longer than usual, I notify my tenant, in writing, with the reason and the expected completion date of the repair. As long as I do this, in writing, I am not going to be penalized; however, if I don’t make the call and I don’t write the letter, then the tenant gets a $10 per day discount on the rent for that month. This is their insurance policy that their needs will be attended to quickly.
Make Tenants Feel Some Responsibility …
Repairs – My tenant is responsible for the first $50 of any repair, no matter what the cause or who is at fault. HVAC goes out, they pay the first $50. If their child puts a toy car in the toilet, they don’t just pay the first $50, they pay the entire bill because their child’s treatment of my property is their responsibility. My lease covers repairs and who pays for what.
- Plumbing – If the problem is above the floor, the tenant pays the whole bill. If the problem is below the floor (in the main drain line) the tenant pays the first $50 and the landlord pays the balance. However in three years, I have never had a problem that has been below the floor of my houses / apartments.
a. Leaking sink – Tenant
b. Overflowing Toilet – Tenant
c. Shower or Bath Problems – Tenant
d. Clogged Drains (“P” Traps) – Tenant
e. Clogged Drain Lines – Landlord
- Other Repairs – Some items in a house will wear out over time but if the tenant is wearing them out, they should be responsible for the repairs.
a. Storm Door Squeaks – Tenant
b. Doors or Windows Don’t Close Tight – Tenant
c. Appliances Break – TENANT (The appliances on the premises are “On Loan” and the rental agreement specifically EXCLUDES appliances of any kind…” If they don’t work, I’ll remove them, but not replace them.
d. Bugs Show Up – TENANT Pays Whole Bill
e. Hot Water Heat quits – Landlord (After the first $50)
f. HVAC Goes Out – Landlord (After the first $50)
- Rent – One of the biggest concerns is getting rent paid on time. What is “On Time”? Your contract outlines what the rent is and when it’s due. It also outlines what happens when rent is late. Rent should be due on the first of each month, but … it’s not late on the 5th, it’s late at 5:01PM ON THE 1ST!!! If you give the tenant until the 5th, they will take it.
Due Date – MY rent is due on the 1st day of the month, by 5:00PM. If the first is a weekend or a holiday, the tenant is responsible for having the payment made early. If the payment is made on the following Monday, it’s late.
- Late Date – Late is any time after 5:01PM on the due date. And if it’s late, there is a late charge. My charge is $50.
- Eviction Date – I start eviction proceedings on the 2nd. A letter goes to the tenant stating, “You’re late and you’re going to be evicted if you don’t pay.” Most of the time this is enough to motivate the tenant to pay. If it doesn’t, I’m ready to file papers on the 5th (when some landlords are just saying it’s late).
- Rent Discount – My goal is NOT to evict. My goal is NOT to get a late payment fee. My goal is to get my money – ON TIME. I encourage them to pay early, by offering a discount. If I want to rent my apartment for $550 per month, I increase that to $600 and offer a discount for paying early. If they pay “on time” rather than early, then I get $50 more.
Conclusion – Landlording is easy, however, so many investors shy away fro properties because they don’t want to be landlords. For those that are willing to rent or lease-option a property, there are whole neighborhoods that are available. But, if you don’t treat rental property like a business and clients with respect, you will have a horrible experience and walk away with your tail between your legs.
Tenants are like children, if we allow them to get away with something once, they will want to do it again. “Train a child up in the way it should go …
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