Take on 5-10% for managing other people’s properties. Hire a part-time manager to handle the details. Once you have twenty or more units, hire a professional management company.
Seek membership in your local apartment association. It is made up of other investment property owners and will keep you up to date on new techniques, as well as informed of changes in tenant/landlord laws. Use it also as a source for learning about new properties for sale. To learn about the local branch, contact the National Apartment Association at 201 North Union, Suite 200 in Alexandria, Virginia 22314 (703.518.6141). Being a member can also save you on the costs of credit checks.
Treat tenants with respect. Check on the property at least once a year. Consider using tenants as a maintenance resource. As part or your rental application, request to know what maintenance skills your tenants possess. Avoid trading rents for services. It is easier to track expenses if they pay rent and you pay for their work. Consider as a possibility furnished rentals. Review your rent payment policy, enforcing discounts, late charges, and bad check charges. Evaluate your policy on rental increases, why have tenants moved out over the last two years.
When purchasing apartment buildings, keep an inherited manager and/or maintenance person a minimum of two weeks before making a decision to keep or dismiss them. Doing this will help you learn about the property and their usefulness. Check out tenants, more so than just verifying their rents and security deposits. Are they all pimps and gangsters?
The difference between a lease and a rental are as follows:
Lease: A contract known as an Estate For Years and should be in writing. The rent is held constant for the terms, usually one year. The tenant can only be evicted for breach, non-payment or disorderly conduct. After expiration, becomes a Tenancy At Will and either party can give 30-day notice. Landlord can keep security deposit if tenant stays less than full term.
Rental: A contract known as a Tenancy At Will, and does not have to be in writing. Term is usually a month-to-month but can be any other period of time. Contract can be terminated at any time, with proper notice of the above term. Cannot get a last month’s rent or usually retain security deposit.
PHYSICAL PROPERTY:
Keep thorough records of maintenance, repair, improvements, and colors of paint for each home or unit. Use the workbook “Easy Accounting for Real Estate Investors to track all financial records.
After the purchase, always begin with exterior improvements. Market the unit while completing the interior. Look for economy, durability, and easy maintenance as you purchase supplies. Most retailers often run clearance sales on overstocked and discontinued models. Consider Sears’ contract division for appliances. Avoid unusual decorating. The most important rooms in the house are the bathroom, kitchen, and master bedroom, respectively. The process after purchase should take three to six weeks. Concentrate on neatness and economy. Try to get at least a 24-month pay back period for what you spend.
Exterior techniques ($500 to $1,000):
Add/improve amenities; grill, swing, pool/spa, fence, lawn furniture, security…
Repair and improve driveway (cement patching, grease removal, weed defoliant, asphalt coating)
Mulch
Cut shrubs and trim trees
Plant new flowers and small shrubs
Mounding (to plant foliage or erect fencing to act as a screen)
Shutters, painted an offset color from the outside of the house – (e.g., if the house is dark, paint the shutters white. If the house is light, paint them green, blue, etc.).
New front door
New exterior lights
Paint trim and garage door
Cliveden Sandstone, American Tradition exterior satin
Ancient Grey, American Tradition exterior satin
Replace/Repair windows
Install central air conditioning
Separate utility meters for multifamily units. If you cannot get your money back in two years, consider the property again.
Add a nice mailbox
Gutter helmet at 888.543.5638
Home security; fire, theft, emergency at 866.657.7144
Interior techniques ($1,500 to $2,500):
Install new bath and kitchen faucets
Or 866.3REBATH also 434.906.2284 for cheap and full repair
Resurface, paint, or replace kitchen and bath fixtures
Paint kitchen cabinets with semi-gloss white and finish them with colorful plastic knobs.
New shower curtains
Repaint refrigerator or replace it with a reconditioned one (automotive painting Co.)
Replace front panel of dishwasher or oven
Wallpaper kitchen and bathrooms (only flips, not rentals)
Wallpaper or vinyl grass cloth over cheap wood paneling
Lower kitchen ceiling and put in fluorescent lights
Tile foyer entry with a nice 12″ Mexican tile.
Ceiling fans
Carpet (F.H.A. or better grade), keep extra carpet loose laid in the bath with a back up wrapped in the attic for the next leasee.
Dead-bolt locks and peep holes that meet the requirements of the Uniform Statewide Building Code.
Replace door handles with new brass finished “S” handles.
Replace doors with the basic hollow-core door. For flips, consider stylish six-panel doors.
Replace front door, painted with high-gloss paint.
Replace electrical switch plates, for the foyer and living room use nice brass plates.
Paint walls (off-white, keep track of paint manufacturer and color code)
Classic white, American Tradition interior satin: walls, trim
Classic white, American Tradition interior semi-gloss: Kitchen/bath
Paint or replace interior trim, consider pre-painted foam and adding crown molding in the entryway and living room.
Do not provide drapes or curtains
Coin operated laundry, vending machines, game equipment for Quads and greater
Rent unused space, whether storage or office space
Regular maintenance should include:
Outdoor, Autumn:
Check all weather stripping and caulking around window and doors.
Check for cracks and holes in house siding.
Take down removable screens.
Clean and repair storm windows and doors.
Drain outside faucets.
Clean leaves from gutters and drain pipes.
Check roof for leaks.
Check flashing on vents, skylights, and chimneys.
Check chimney for damaged cap or loose mortar.
Check chimney flue and ensure damper closes tightly.
Outdoor, Spring:
Check weather-stripping and caulking around windows and door.
Check outside house for cracked or peeling paint.
Remove, clean, and store removable storm windows.
Check all doors and window screen.
Inside, Autumn:
Check insulation and replace or add as needed.
Get heating system service. Change furnace filters.
Do maintenance on hot water heater recommended by manufacturer.
Check faucets for leaks. Replace washer as needed.
Check and clean refrigerator coils.
Check and clean major appliances according to manufacturer’s instructions.
Check all fire extinguishers, review instructions for using.
Replace batteries in all smoke detectors at daylight savings time.
Inside, Spring:
Replace filters on air conditioners.
Check and clean vents and filters on dryer, stove, and room fans.
Check seals on refrigerator and freezer. Clean coils and burner surfaces, adjust burners.
Clean fireplace; leave damper open for improved ventilation if not air-conditioned.
Check basement wall and floors for dampness and make repairs as needed.
Check leaky faucets and replace washers as needed.
Check attic for proper ventilation. Open attic vents.
Check attics, basements, and all rooms for fire or other hazard.
Clean and repair draperies, blinds, and windows.
Replace batteries in all smoke detectors at daylight savings time.
Statistically, the most lucrative returns on home improvements, their typical costs, increase in selling price, and their average returns respectively, are as follows:
Lighten and brighten $ 86 – 110 $ 768 – 935 769%
Clean and de-clutter $ 305 – 339 $ 2,093 – 2,378 594%
Landscape and trim $ 432 – 506 $ 1,594 – 1,839 266%
Fix plumbing, electrical $ 338 – 381 $ 922 – 1,208 196%
Staging $ 812 – 1089 $ 2,275 – 2,841 169%
Kitchen, bath upgrades $ 1,546 – 2,120 $ 3,823 – 4,885 138%
Paint interior walls $ 1,453 – 1,588 $ 2,342 – 2,600 63%
Repair flooring $ 1,531 – 1,714 $ 2,267 – 2,589 50%
Replace carpeting $ 2,602 – 2,765 $ 3,585 – 3,900 39%
Paint exterior walls $ 1,531 – 1,714 $ 2,267 – 2,589 34%
The following adds to home value:
Being within 300 ft. of a body of water + 27.8%
A third bathroom + 17.5%
A fireplace + 10.8%
Adding 500 sq. ft. of floor space + 9.4%
Adding a family room + 5.9%
A fourth bedroom + 5.2%
The following takes away from home value:
Neighborhood with abandoned buildings – 30.7%
No second bathroom – 18.5%
No garage – 14.6%
Neglect of houses nearby – 14.5%
No central air – 12.4%
Neighborhood streets in disrepair – 6.5%
The following are easy-to-mix home remedies, alternatives to hazardous household products.
All-purpose cleaner: Mix one-quarter cup of vinegar with one gallon of hot water.
Abrasive cleaner: Mix equal parts of salt and baking soda. Scrub mixture and wet sponge. Rinse with all-purpose cleaner and then warm water.
Ant repellents: Place chili powder, talcum powder or powdered chalk at entry.
Bathroom cleanser: Scrub area with baking soda and wet sponge. Rinse with all-purpose cleaner.
Bathtub cleanser: Clean with sponge and 1/3 muriatic acid and 2/3 water.
Brass/copper polish: Mix one-teaspoon salt, one-tablespoon flour and enough vinegar to make a thick paste. Rub paste on surface and let dry completely. Rinse in warm soapy water and buff with clean, soft cloth.
Drain cleaner: Pour one-quarter cup of baking soda down the drain: follow with one-half cup of vinegar. After fizzing stops, flush with boiling water.
Floor cleaner: Mix one-half cup of white vinegar with one-half gallon of warm water.
Furniture polish: Mix together one-half cup of lemon juice with one cup of mineral oil.
Pet stain remover: Mix together one-quarter cup of white vinegar and one-quarter cup of liquid soap. Rub into stain and then blot. Rinse with warm water.
Silver polish: Put a sheet of aluminum foil in the bottom of the kitchen sink and fill with two or three inches of warm water. Add one tablespoon each of salt and baking soda. Place silver in the water, touching the foil. Soak for one hour. Rinse in soapy water. Buff.
Window cleaner: Mix together three tablespoons of vinegar and one quart of hot water. Wipe off with newspaper.
ADVERTISING:
Call your competition to learn a niche in the marketplace and to determine the market’s strength.
Begin immediately after completing the exterior improvements with a sign on the property. Avoid showing the interior until rehab work is substantially completed. If necessary say “My insurance company won’t allow me to show the property yet.” At which time begin advertising in the paper. When selling the place, target first time homebuyers. If the property doesn’t sell when rehab is finished, list the property with a broker.
Run a classified ad for ten days, which is usually the best rate. If advertising a lease option, be sure to advertise in the rental as well as the homes for sale. When advertising, do not mention:
Lease lengths Reference requirements Security deposit requirements
Address
When advertising, mention:
“Ask about special discount” Newly redecorated
Rent amount Number of bedrooms Location
Basement Storage Garage
Schools Duplex Fully carpeted
Heating Lot size Lease option
Town house Washer/Dryer Fireplace
Den/Family room
Advertise “Special discount for annual lease.” Respond that if they qualify as a tenant, abide by the terms of the lease, pay rent on time that they will receive a $50 discount off the lease rate. Offer a larger discount they will sign for a 15 to 18 month lease (additional $15 to $20 per month). Offer to allow the tenant to pay monthly or biweekly (You will receive an extra month’s income for biweekly).
Advertising should include bulletin boards at work, school, and church. Word of mouth through friends, current tenants, and neighbors, offering a $100 incentive to anyone who recommends someone who leases from you. Place a sign in front of the residence. Go door-to-door or visit personnel or housing offices of large employers in the area. Use the local apartment locator services. Leave a notice at the local Chamber of Commerce. Notify local military housing offices of vacancies. Contact the Section 8 office (804.708.4361). Place your name, phone number, and address on the agency’s Suitable Housing List.
When showing the property, turn it into a showcase, get rid of clutter, and make sure it is accessible and available to show. Give as little information as possible and gather as much as possible. Emphasize those aspects of the property that strike an emotional reaction. Let the tenants discover the property at their own speed. Do not appear desperate to rent. You want the property clean, neat, and attractive, paying particular attention to the bathrooms and kitchen. Never show a vacant apartment or home to a prospective tenant unless it is ready for occupancy.
The more you remind them about how happy they will be living in your wonderful house/apartment, the more likely they will be to respond positively.
If you live far away from the property, show to several people in one trip. If it is a multi-family property, have another tenant show the home. If a single unit dwelling, you can have a neighbor or retiree show the place with a $50 – $100 bonus if effective.
To close on the agreement, get them emotionally and psychologically committed. Accept a down payment. If they have none, get $5 or a watch or even a cigarette lighter. Have them fill out the Rental Application.
If a property is vacant for more than two weeks, consider a rental incentive like a microwave oven or a small color television set. For help filling an unplanned vacancy at a modest fee, rental companies will locate tenants. Look in the Apartment Hunter’s Guide, yellow pages, or contact the Board of Realtors.
Establish a phone mailbox account and direct all calls to this account when advertising a rental. Establish a two step message. First, describe the property details, including location and directions to get there. At this point, invite the inquirer to drive by and walk around it, making a visual inspection. After this, progress to the next step, and leave their contact information. Speak with them when Your schedule permits.
During the walk through, observe the renter. Take a partial deposit fee to cover a background check. Next have them complete a rental application. If they are not accepted, their deposit money should be promptly returned. Make sure, in writing, that they understand the nonrefundable fee for processing the credit report. If they are reluctant to give you this processing fee, you are not required to consider them further.
Contract with a credit/skip trace service in your area. Watch for criminal record or previous payment problems, especially with a previous rental. Give 5% incentive to pay before the 1st, full until the 5th, % after the 5th. Ask your advisor about local requirements and restrictions on any of the contractual matters. Give your client the benefit of the doubt, but with your eyes wide open. Give them positive incentives first. Assess penalties only when incentive have not been effective.
PRICING:
$20 application fee, to be returned if they do not rent the dwelling.
$50 to $100 discount for paying rent by 5:00 p.m. on the fourth of every month. Do this especially if you expect rent control in the near future. Each year you can lower the discount and in effect raise the rent.
$20 discount for signing a fifteen or greater month lease. Remind them that their rents will not increase in this time.
$20 fee for each dishonored check.
$50 (forewarn the tenants) for a carpet cleaning.
$25 for any repair charge.
$X for pet/waterbed agreement. Consider the cost of new carpeting, painting, kitchen and bath floors, and two trips from pest control.
$25+ rent increase each year. Give tenants three-month notice. Also collect the difference of the renewed last month’s rent. Send a thank you note as well.
Give tenant option to pay bi-weekly (and receive thirteen month’s of rent).
Charge extra per month and extra indemnification money for pets
Rents are due on the first of the month. When they move in, they pay the full first month’s rent. Should they move in on the 17th of December, on the 17th of January the tenants will owe 15 days worth of rent. Since January has 31 days, divide total rent by 31 and multiply it by 15 (31-17+1) to determine the amount due. On February 1st, begin collecting rent on the first of the month.
The indemnification deposit and the month’s rent should always be two different figures. If they are the same the tenants tend to use the deposit as their last month’s rent. Check state law for deposit requirements, most likely you m must keep it in an interest bearing account. The indemnification deposit shall accrue interest at an annual rate equal to one percentage point below the Federal Reserve Board Discount rate as of the first of the year of acceptance, unless the term is for less than thirteen months. For rates, contact the Department of Housing and Community Development at 804.371.7015. Put in writing all deductions from the indemnification deposit.
If a tenant needs or wants anything buy your budget won’t allow for it, have them pay for it, or part of it. Spread it out over several months. By using your tenants as the bank, you also make it less painless to raise their rents. If it is necessary to raise rents by such an extent that it would entice the tenant to leave ($25+), consider the following. “Ms. Tenant, as you know your lease expires next month. You’ve been paying $450 per month buy the rent for this apartment is $500 (as if it were set in stone). We’ve got to raise your rent and show it on the books as $500. But, because you’re such a good resident (or because you have been here so long) the company feels that it’s fair to share in that increase. The $50 a month increases amounts to $600 a year. Here is a check for $300 made out to you. You can use it toward your next rent payment or keep it and apply it evenly over the next twelve months. It is our way of saying thanks for living here.” Write this $300 off as an expense while the value of the property appreciates.
Ask for trade discounts at all stores. Say you own a property investment and management business. Ask what type of courtesy trade discount do you extend? Try to establish a charge account and get a discount. Ask about special volume or bulk discounts.
You should learn property management by doing everything yourself, for your first few homes. Managing managers will be more effective if you know how to do the job yourself. “People do what you inspect, not what you expect.”
If you hire a handyman for duplex or quad, pay them $25 per month to collect rents and do odd jobs. Add $30 if they mow grass and shovel snow. Pay $5 per unit for assisting management with no manual labor. If there are 10 to 15 units, pay $10 per unit, anything greater, pay 3% to 5% of the gross income. Have workman’s compensation.
To increase income, see Physical Property, above. To reduce expenses:
Review utility bills for trends and comparisons to other properties, consider timers on lights
Evaluate insurance, get competitive bids every couple of years
Lower real estate taxes, complain to the tax assessor
Scrutinize repair bills, repair versus replace, higher moonlighters (servicemen off the clock)
Revise repair policy relating to tenants sharing costs
Evaluate all service contracts
Look at management costs, more work, less money, eliminate contractors
Are professional fees out of line
Examine advertising policy, don’t be too pennywise
TENANT SELECTION PROCESS:
After giving them an application, tell them you will be in touch within 48 hours.
Be sensitive to Federal Housing Guidelines. Amended in 1988, the Title VIII of the Civil Rights Act of 1968 is designed to curb discrimination in the buyer/seller and landlord/tenant relationship. The law prohibits:
Indicating that a property is not for sale when in fact it is.
Any discrimination in condition, terms, services, or privileges
Any refusal to sell, rent or make available a property after the receipt of an offer based on race, color, religion, sex, national origin, handicap or familial status.
Steering a minority to certain neighborhoods.
Advertising which expresses a discriminatory preference.
Refusing to sell or rent on the basis of a person’s family size. (Except for the state-approved limit on the number of residents allowed.)
Conduct complete credit and reference checks before any agreement is made. Select tenants who:
Have a stable job with a monthly income that at least triples their rental payment. Do not rent to a person who will require more than 40% of their income for rent.
Are interested in living in above-average rental property.
Are middle-income married couples, statistically the most reliable tenants.
Have reasonably good credit.
Can pay at least the first month’s rent and a security deposit.
Have good references from their previous two landlords.
Will rent for an extended period of time, at least one year.
Don’t have pets, especially in multi-family units.
Refuse tenants based on the following:
Poor or no credit.
Lack of stable income.
Misrepresentation on rental application.
History of eviction or being a problem tenant.
Cannot pay up front rental expenses.
Job or hobby disturbs neighbors or damages property.
Speak to their employer, ask if the tenants have good prospects for continued employment and if they know of any reason why they wouldn’t make for a good tenant. Speak also to their present landlord. Be aware that they may be anxious to get rid of a bad tenant by speaking highly of them. Check their personal references. If everything checks out, there may be no need for a credit check.
Notify applicants if you reject their applications. Simply inform them that their application was not as competitive as others you considered. It is not necessary to share how you arrived at your decision. File all rejected applications, which may be an important reference if the re-apply in the future.
Meet their pets before allowing them in the property.
NOTIFYING THE APPROVED TENANT:
Never let a tenant move into a property until the entire first month’s rent and indemnification deposit (as opposed to a security deposit to indemnify the landlord against damages) has been paid in cash or the check has cleared. Allow tenant to finance the remaining last month’s rent interest free over a four-month period. Beyond that time, 10% interest will be charged. The term of the lease should end on the last day of the month that the term began.
Treat tenants courteously and enforce all policies. While signing the residential lease/rental agreement, make sure they clearly understand the rental agreement, carefully review the contract. Give them a copy of the contract, keeping the original for yourself. Have them understand that the last month’s rent only applies to the last month of the lease and not the last month of occupancy if the lease is breached. See also pricing guideline. Inform tenant of any lead based paint in unit, or any other environmental and health concern. Complete the move in/move out form. Supply tenant with insurance reminder letter. Inform them that the appliances are on loan and that they will assume the repair bills. Have them sign the Pet Agreement form and Waterbed Agreement form if necessary.
Create and provide a list of policies and rules for each tenant and reference them in your lease or rental agreement. Adopt a policy that windows must be appropriately covered with blinds. Establish a move-out cost list that details what tenants will be charged for items you have to repair or clean. Provide also a list of servicemen for the tenant to call, instead of calling you.
Let tenants know when you can be reached. Do not give the impression that you are always available. Make scheduled appointments and establish a set day for property visits. Many problems can be solved over the phone. Guard against your personal residence, send rent to a post office box and use a separate phone line. Give them a supply of pre-addressed envelops.
Learn as much as you can about the tenants. Keep a small notepad nearby and record the information they deem important. This includes each of their names, their pet’s names, birthdays, hobbies, work responsibilities, employment information, etc. Refer to this information before meeting with them and casually use it in conversation. This technique will work wonders at retaining your tenants.
Holding on to a good tenant will save a lot of money. Give them a nice houseplant as a house warming present. Record and take note of their birthdays, sending them appropriate cards. If they are especially good, send a ham at Christmas or gift certificate from local food store, possibly a bottle of champagne and card for New Year’s Eve. Send them a card at the anniversary of their tenancy. If they have been there several years, do something substantial for the house.
Should they ask for a special accommodation, favor, or consideration make sure to “speak to your partner” before you can answer them.
Also in writing, disclose the landlord’s name or any person authorized to manage the premises. Any person authorized to act for and on the behalf of the owner, for the purposes of service of process and receiving and receipting for notices and demands. Keep these forms updated.
Should sale of the property take place, inform them of the new owners and their contact information.
Never allow tenants to sublet the premises. If you do allow this, have them fill out the Permission to Sublet form. If the lease permits a tenant to vacate the property during the term of the lease, the Tenants Mandatory Notice to Landlord of Intention to Vacate form is used to allow the landlord time to search for another tenant
Tell them that you are willing to loan the appliances to them for the period of the lease, but you are not responsible for any maintenance, repair, or replacement.
Outline a rent collection system. Specify in the lease, not just verbally, how the property may be used.
Case law and legislation require that landlords exercise reasonable care in the management of their property to prevent foreseeable injuries to others. The duty to inspect the premises, to make sure it is safe from dangerous conditions arises when, the lease is renewed, extended, or initially entered into; or, the periodic right to inspect or approve of construction is granted to the landlord. The landlord’s duty to maintain, inspect, repair, and make habitable a property cannot be delegated to a property manager. Watch for dangerous animals, unfinished repairs, poorly maintained locks, doors, gates, lights, safety measures, broken fixtures, criminal activity, even litter on your tenants flooring can be dangerous.
DURNING TENANT OCCUPANCY:
Consider special renewal bonuses for good tenants. It cost four to five times more money to get a new tenant than it does to retain the one you presently have. Near the end of the lease, give them an incentive gift, ceiling fan, bathroom update, repainting the interior or exterior, landscape work. Have their gift be an investment.
If the tenant does not pay by the 5th of the month, give them a polite call or visit. If visiting, take along the Notice of Overdue Rent form. Ask if their payment is in the mail already. If they are unable to pay at the moment but are sincere in doing so, have them fill out the Payment Agreement.
If the tenant does not pay by the 8th of the month, repeat your call or visit saying your partners (or your company) insist that you pay or vacate the home. If the tenant does not pay by the 15th, proceed with eviction notice.
If you receive a check, go immediately to their bank and cash it. If there are insufficient funds (ISF), say “Oh, he owes me some money and I’m sure he didn’t realize he didn’t have enough cash in his account. I can go back and get another check. How large a check can he cover so I can tell him?” Make a cash deposit for the balance if it is worth, this way you will at least get some money. After doing this, present his check for payment.
If they will not give the amount of ISF, call the accounting department of the bank. Start with three quarters of the amount of the check you have. Say “I have a check from Mr. Renter here for $375. Tell me, will the bank honor it?” If not, call back with a lower amount. Once confirmed, you’ll know how much to deposit to their account to make the original check good.
If you do not receive a check from the tenant, give them the Landlord’s Five-Day Notice.
For any reason you feel the tenants are breaching the lease contract, give them the 30-Day Notice to Terminate Tenancy form.
You are organized and therefore have a level of “inviolate expectation.” You can pick up forms at your local office supply store, a real estate rental agency, or your own attorney prepared forms. Set up a file system begin with:
Rental application form
Written instructions stating expectations for obtaining credit report and background check
Rental unit preparation form
Move in checklist
Maintenance request form
Maintenance guaranty form
Lease agreement, and
Lease-option qualifying form
EVICTION PROCEEDINGS:
As a landlord plaintiff, you may bring two different actions against a tenant defendant:
Unlawful Detainer: When suing to have tenant removed from the property and asking court to also give you back rent, late charges, collection charges, attorney fees, and any other damages.
Warrant in Debt: When suing for back rent, late charges, collection charges, damages, or to have the tenant perform according to the lease. You are not asking to evict the tenant.
A listing of notice requirements and eviction laws for all 50 states can be found at www.successdna.com. There is a three and five day notice, depending on the state, to pay rent or quit the premises. The notice states the exact amount of delinquent rent owned, a specific requirement in many states. The notice also states that if the tenant does not pay in time and the landlord elects to forfeit, by accepting no payment after the end of the five days, the leasehold expires and you may retake the premises. A material tenant default, such as failure to pay rent, allows for the prompt forfeiture of the tenancy.
If they do not pay on time, within the five days, go to the county courthouse and obtain a Writ of Eviction. Have an attorney file an unlawful detainer action to evict the tenant. After a set time, go to the courthouse and take out a writ of possession. A sheriff’s deputy will then physically remove tenant and their possessions. The process may take two weeks to three months, it is costly and time consuming.
If a tenant is fifteen days late in paying the rent, it is very unlikely that they are going to pay. Go to them and explain your situation, that while they are living in the property, no income is being generated to support and maintain it. Let them know that other people are interested in the property and that it is in their best interest that they move out immediately. If they agree, pay them $100, $200, even $300 to move out within 24 hours. Remind them that they could be sued for the entire remaining amount owed under the terms of the contract. This would never hold in court (unless the property is commercial) but may intimidate them.
Do not do anything illegal. Examples include removing front door or toilet for repair, turning off electricity or other utilities, etc.
Crucial: visit the clerk of your district courthouse to learn what legal forms and procedures are used in your area. Keep informed of the Virginia Residential Landlord and Tenant Act (VRLTA). For reference, the Central Virginia Legal Aid Society phone number is 804.648.1012. Also the Virginia Office of Consumer Affairs at 800.552.9960 or 804.786.2042 can provide assistance.
AFTER TENANT LEAVES:
When the tenant gives a thirty-day notice at the end of the lease term, use their last month’s rent. After everything is removed, go over the original Move in/move out form with them. Never refund the deposit on the spot. If their indemnification deposit is to be forfeited, give them a letter regarding the disposition of the funds within fifteen days (Check VA law). Send the letter to the address they rented from you if necessary. If the post office returns the letter “address unknown,” put the unopened postmarked letter in their file and keep it for at least a year.
Paint the interior at no cost to the tenant, considered normal wear and tear.
SECTION 8:
Section 8 of the Housing and Community Development Act of 1974 was created to assist low-income people in finding safe, decent, and sanitary housing. It is administered by the United States Department of Housing and Urban Development (HUD).
There are two parts to the program. One is where HUD makes a contract with an apartment project owner to pay the difference between 30% of the qualifying tenant’s income and a contract rent set by HUD. This contract rent is based on the owner’s operating expenses and it is generally lower than the fair market rent as defined in the second part. The local Public Housing Agencies PHA administers the second part of the program. Each year these local agencies enter in to an Annual Contributions Contract with HUD and agree to administer the money that has been allocated to them.
The PHA inspects the property annually and determines the fair market rent, known as contract rent. They also make direct payments to the owners for the difference between the contract rent and the tenant’s rent. Individuals qualify if their earnings are less than 50% of the median income in the area in which they live. The tenant’s rent is not permitted to exceed 30% of his adjusted gross income. Tenants are issued either certificates or vouchers. The difference between the two is as follows:
Certificate holder: Cannot enter a lease contract when the lease amount exceeds the PHA determination of fair market rent. The tenant is prohibited from making any side payments to the landlord. Guaranteed assistance lasts up to fifteen years. More common.
Voucher holder: There is no limit to the rent that the tenant may pay. Guaranteed assistance lasts up to five years. Less common.
Any type of property can be submitted for acceptance. Call your Section 8 office, listed under the Housing Authority and ask them to inspect the property. The Section 8 market value rent and actual rent rates are nearly the same. Whether utilities are included or not will determine the tenant’s rent.
BOOKKEEPING:
For each property, mark the address along with “PROPERTY RECORDS.” Include everything from closing statements to amortization schedules, with the Property Information Sheet, as the cover. Hold onto these records indefinitely. Include anything relating to the property such as changes to the insurance policy to pest control reports. After selling the property, store these documents with your other permanent records. Arrange these files either in alphabetical order or according to the date of purchase.
When property is rented, mark all records in a file “RESIDENTIAL RECORDS.” These include a thorough tenant profile, their application, credit report if necessary, the lease, and move in/move out form. When the tenant moves out, staple all work (including letter about deposit) together with move out date written across the lease. Leave this packet in file but with new tenants loose papers in front.
To record income, use the ledger sheet marked Monthly income record. Record the property address on the left. On the first of the month, pencil in the rent due. When it is collected, highlight through the rent amount. In the case of Section 8 housing units show both amounts, the PHA and the tenant. Record the last month’s rent when received, it is taxable in the year received. Record the indemnification deposits, exclude the accrued interest, when the tenant moves.
To record expenses, as bills are received and paid, they are marked with the payment date and the check number. Next, place them in a large envelope marked by address, with the newest bills at the back. If a repair bill involves more than one property, the total charge should be apportioned between properties and a notation make on the bill. Have a separate ledger sheet for each property, called the Expense allocation summary. Capital expenditures cannot be expensed in the year they were purchased. Mark such entries on the Real estate allocation worksheet. In general, if the expenditure is made to maintain the building, you can deduct it. If it is made to improve the building or extend its life, you must capitalize it.
Keep all “MORTGAGE PAYMENT” books in a single folder. Keep amortization schedules for purchase money mortgages the seller has taken back. A separate sheet showing any extraordinary mortgage payments, such as balloons are included in this file. Use the Mortgage Loan Record to keep track of periodic payments made on a note that is collateralized by a mortgage. Use the Mortgage Payment Control Form to record mortgage payments from several properties.
Keep a list of “LEASE EXPIRATIONS” in a single folder. By checking the folder once a month, you can decide about the rent increase and give the tenant a 30-day notice or prepare the Extension of Lease form.
Keep a master copy of all the enclosed forms and a somewhere in a locked drawer, a key storage.
Keep track of rents and property conditions with:
Property information sheet
Expense allocation summary
Mortgage payment control form
Monthly income schedule
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