Time-Saving Financial Management Tips for Landlords

Being a landlord requires a significant amount of time and financial investment. One way to reduce the amount of time spent managing a rental property is to streamline how finances are handled. These financial tips can shave valuable hours from your weekly landlord duties.

 

Discuss Property Purchases with an Accountant

An accountant can offer useful financial suggestions regarding investment real estate purchases. While you may be an expert at management, your accountant is the expert at tax-friendly property financing, calculating property depreciation, the financial benefits and drawbacks of incorporating rental properties, and documentation for tax season. This expert advice can save you both time and money, and may prevent you from making costly mistakes. For example, people who are purchasing a sixth rental property may not be able to receive financing without incorporating their rental properties into a freestanding business. An accountant will be able to spot this problem and recommend an attorney to file any necessary paperwork.

 

Consider Accepting Online Rental Payments

Are you still accepting paper checks for rental payments? You aren’t alone. Paper checks are still a popular way of collecting rent, but this payment method is antiquated. Online rent payments are much quicker and can save a lot of time and potential hassle. With online payments, you can immediately see when a rent payment has been made, and you don’t have to worry if a check is lost in the mail. You can also send email reminders a few days before the rent is due.

Some landlords avoid online rental payments due to the cost of processing fees. While these fees are a reality, when you factor in the elimination of returned check fees and quicker payments, you may actually end up saving money by accepting online payments. In addition, offering online rental payments can be a selling point to young professionals who seldom write checks.

 

Try a Digital Financial Management System

By law, landlords must record their rental income, keep track of their rental expenditures, and produce documentation that supports their bookkeeping when requested. Each year, these record keeping requirements can yield hundreds of pages of documents that must be stored and examined during tax time. With a digital system, bank statements, rental payment records, and other documents can all be uploaded and stored within a single software program. Landlords can also scan paper receipts and store them digitally. Many programs automatically detect essential information from these financial records and use the data to create up-to-date spreadsheets. Digital records are also safer than paper records. For example, a fire can destroy paper records and computers, but digital files stored on the cloud (securely stored on the Internet) will remain safe.

 

Schedule Annual Property Inspections

Booking regular property inspections may seem like a waste of time, but they can uncover small problems that can quickly turn into expensive time-consuming projects. An annual roof inspection can detect a few missing shingles or a small leak before water damage and mold occur. Examining the bathroom can uncover deteriorating caulk, which can lead to expensive water damage. Recaulking a tub or patching a small leak may take a day to complete. Fixing water damage and mold from an overlooked problem could be an expensive two-week project.

To avoid wasting time while managing rental properties, it’s important that landlords establish a system that will help avoid unpleasant surprises and minimize bookkeeping. Learning new software or meeting with a property inspector will require a few extra hours of time, but these investments will easily yield dividends for years to come.

Landlord’s Guide to Rental Discrimination

Discrimination is a bad word in today’s society, but landlord’s need to discriminate as much as they legally can in order to get the best tenants possible into their property.

What a landlord can and cannot do is government by local landlord/tenant laws, so before starting any vetting process, make sure to check local statutes for specific ways you may need to be in compliance.

When Is Rental Discrimination Illegal?

In general, tenants are protected from certain types of discrimination wherever the rental home might be located.

The Federal Fair Housing Act and Fair Housing Amendments Act specifically prohibits a landlord from rejecting an application from a tenant for the following reasons.

  • Race or religion.
  • The ethnic background of the prospect or their national origin.
  • Gender.
  • The status of the family, including children.
  • Physical or mental disabilities.

Some laws also specifically prohibit discrimination due to sexual orientation, the age of the applicant, or the prospect’s marital status.

Even subtle differences in the application process, such as setting a higher income standard for certain households or setting different terms in a lease for different demographics could be considered illegal rental discrimination.

When Is Rental Discrimination Legal?

As a landlord, you need to be able to screen dangerous tenants away from your property as much as possible.

This means that the #1 method of legal discrimination that you can implement is a consistent policy of not accepting tenants that have committed certain crimes.

For homes that are near schools, this is especially critical to do because you could be held legally responsible for a tenant who reoffends.

If you’re concerned about how certain households may treat your property, then you may also wish to set a high income standard that applies to every applicant.

Requiring a minimum income is a valid business reason to reject a tenant because you have a certain level of profitability that is required.

Performing a credit check or implementing credit score minimums is another way to help prevent problem tenants from sneaking into your property on you.

If a tenant does not have a positive reference from a previous landlord, then this can also become the cause of a rejection.

Not having a positive reference from an employer, however, is not necessarily something that you can use to reject a tenant.

Not having a job or evidence that a rental lease can be met over a specific amount of time may be a valid reason to discriminate.

Having a poor reputation, but the ability to pay rent consistently, may not be a valid reason to discriminate.

As long as you have valid business reasons to reject a tenant that are not based in any way on the illegal rental discrimination areas that are in place, then you can do so.

This will allow you to be able to effectively screen out potentially problematic tenants so that you can have a long-term investment with your rental property.

Selling A Rental Property With Tenants

Selling a rental property with tenants may be very straightforward; having a tenant in place can make for an unpleasant selling experience. Most real estate professionals will recommend allowing a lease to expire before selling a home. That isn’t always a possibility, so it is important to make sure that local landlord-tenant laws, which vary by jurisdiction, are taken into consideration. Some tenants have the right of first refusal. Others have this right when an offer comes in. A smart tenant can hold up the sale of a rental property for at least 12 months. This has a negative impact on the sales price, so getting the tenants on board with the sale is incredibly important. You get the advantage of selling the property. Your tenants need some advantages too. Here are some ideas to help get them on board so they house stays clean.

1. Offer a Rental Discount

If you know that the property is going to be on the market for at least a month, then give them a break on their rent for that month. Most tenants will laugh at a 10% discount or less. Think bigger – like 50% – to make an impression on them. You might take a small loss that month, but maybe you’ll get a sale on the property that will make up the difference.

2. Tenants Don’t Always Need to Vacate a Home

If the house is going on the market, landlord-tenant laws are often very specific about the lease you have signed. Your tenants may not need to vacate the premises at all because they have a business contract to occupy the property. Having a tenant home during an open house is a bad idea, so try offering a free hotel room or other incentive that will make life easier for them.

3. The Lease May Not Expire Upon a Sale

Many jurisdictions have the new owner taking over the business contract for the property. This means that an eviction does not automatically take place upon the sale of a property. If there is 9 months left in the lease and the new owner wants to live in the house, then some tenants may stay the full amount of time. Offering to subsidize a new rental deposit, the cost of rent for a month or two, or a straight cash payment might change their mind.

4. It is the Tenant’s Home

Many landlords see a rental property as an investment or business commodity, but tenants see it as their home. Their belongings are there and they’ve build memories there. Offering them a gift certificate to go have a nice dinner somewhere isn’t going to alleviate any concerns they have for their family heirlooms. You’ll likely need to put something into writing that will give them a legal guarantee that you and your real estate professional will protect their things.

5. Give Notice in Writing

Most jurisdictions require at least 24 hours in a written notice for a showing or an open house. If you do not provide this notice, then a tenant may not be required to let you, the real estate agent, or anyone else into the home.

5 Time Management Tools to Help Busy Landlords

You enjoy the experience of being a landlord, especially the income generating part of it.

However, if you don’t have the time to enjoy the money, what’s the point?

Your property management duties take up a lot of time, especially when you’re starting out.

You’ve got technology on hand to help you work smarter and more efficiently, such as accounting software, work order management, and electronic document signing.

1. Accounting Software
Filling out your taxes with income generating properties is quite a different experience from filling out a 1040-EZ.

If you come from a wage earner’s background, getting help with bookkeeping and taxes is a must.

QuickBooks is a common accounting software that is loaded with features and grows with your business.

If you prefer app-based software with a lower learning curve, try Expensify.

It automatically uploads pictures of receipts (taken with your phone) and syncs that expense amount with the app and supported accounting software.

2. Cloud-Based To-Do List
Is your property to-do list scribbled down on a piece of paper you lost in your car?

Step into the modern era by using a cloud-based to-do list, such as Wunderlist.

Cloud-based solutions are hosted on third party servers, so you can access them from any device with a web browser.

You write your to-do list once and it’s available and synced on your smartphone, desktop, and tablet.

Wunderlist allows you to create multiple to-do lists, so you can sort your tasks by category, property, or another organizational system.

3. Work Order Management Software
 Work order management software, such as LandlordStation’s tenant portal, allows tenants to send maintenance requests online or via mobile.

Work order management software streamlines the process on getting tenant problems handled, since you don’t have to check your voice mail for requests or keep paper copies of which property is having issues.

In addition, if it’s easy for the tenants to report problems, they’re more likely to let you know when something is wrong instead of ignoring it.

4. Electronic Document Signing
You found the perfect tenant, but their work schedule isn’t working with your availability when it comes to document signing and drop off.

Electronic document signing takes care of this issue by allowing the tenant to sign it online.

You use an electronic document signing service to upload your lease agreement and add marks that show where the tenant needs to sign through their software.

Once that’s squared away, you can send the document to the tenant’s email and they are directed to the electronic document for their digital signature and completion of the lease agreement signing.

If you already have your lease agreement typed up as a document, the only extra work you need to do is sending it through the electronic document signing system.

5. Automatic Backup Software
You deal with valuable documents as part of doing business as a landlord.

If you store everything on your local computer, keeping everything backed up is essential.

You don’t want to leave data redundancy up to chance, so use an automatic backup software so you always have your data available.

Some backup software also saves the data off-site, so you are safe even if your computer is damaged or destroyed in an accident.

Some backup software options include Carbonite, Seagate Backup Plus, and Microsoft Backup and Restore.

 

How to Verify Military Service

Claiming military service is an easy way to try to get benefits, discounts, and other perks.

Many will simply take a person’s word on their military service and issue the appropriate discount.

In some industries, such as real estate or employment, the claim of military service must be verified.

Here’s how you can do it.

 

1. Request an Official Record.

You can obtain the dates of service, a person’s rank, and even their duty assignments and status just be officially requesting them.

This request is made through the National Archives and is available through the Freedom of Information Act.

Make sure to include the reason why the information is necessary.

National Guard records can be obtained through the National Personnel Records Center.

2. Ask for Their Class Number.

Smart folks know that there are some bits of information that are classified, even from public information requests.

They’ll claim to be a Navy Seal or an undercover operative.

Every Navy Seal is issued a class number, so just ask the person for this information.

It’s a treasured number and will be instantly repeated.

If not, then you’ve just verified that they probably didn’t serve.

3. International Service Can Also be Verified.

Several nations keep thorough rolls of their military service members that have information that is sent with a simple request.

Just contact the nation’s version of the US National Archives, state the reason for verification, and then wait for the answer.

Most records date back to World War II.

4. Check the POW Network.

One of the more unique claims of military service is that someone was a prisoner of war and that their records may have been wiped clean for political purposes.

There is an independent database keeps track of the POWs that were known from wars since Vietnam called the POW Network.

It lists all those who were declared MIA or POW since 1952.

Finding military service information can be difficult at times not because of classified materials, but because of fake claims.

These options will help you be able to sort out the facts from the fiction.

5 Ways Landlords Save Money By Making Homes Eco-Friendly

Many individuals, landlords included, are opting to “go green.”

By making a property more eco-friendly, a landlord reduces the environmental impact of that home, but in addition to this benefit, there are a variety of ways it can also save them money.

1. Utilities Savings
While some landlords leave it to their tenants to have all utilities turned on, many also offer certain utilities, such as water and gas, as part of the rental agreement.

By installing water-saving technologies, such as low-flow shower heads and toilets, landlords can greatly reduce their water costs.
Similarly, investing in better insulation and new furnaces can reduce natural gas costs.

These are only a few options, as there are numerous home energy audits a landlord can perform to reduce a property’s environmental impact.

2. Tax Breaks
Although tenants are the ones who will inhabit a property, they’re not the ones who will have to pay taxes on it.

Because of this, it’s important for landlords to try to reduce their tax burden in any way possible, and fortunately, it’s easy to do this by simply going green.

The Database of State Incentives for Renewables and Efficiency (DSIRE) offers a resource that lists federal, state, and local tax incentives for home upgrades that are more environmentally sustainable.

3. Reduced Supplies Costs
Even seemingly minor costs can quickly add up for landlords who maintain more than one property. Paper waste, for instance, can quickly add up over the years.

Fortunately, a fair amount of this waste can be eliminated by simply using property management software that allows tenants to pay their rent online and landlords to perform background checks right over the internet.

4. Lower Repair Costs
Making a few eco-friendly changes around a property can also greatly reduce the repair costs that landlords see during a typical rental agreement.

Installing efficient insulation, for instance, will provide a home with better temperature regulation.

By doing this, HVAC systems will experience less strain from trying to maintain a comfortable temperature in a home.

Reduced HVAC running time equates to less wear and tear, and in the end, this means longer periods of time between necessary repairs and replacements.

5. Savings on Waste Removal
It’s also possible for landlords in certain areas to save money by reducing the amount of waste generated in their rental properties.

Many cities and counties, for instance, actually charge for waste removal based on the weight or volume of what’s removed from the property.

This means that, by simply eliminating some of the garbage created by tenants, landlords who cover waste removal can save money.

Unfortunately, it’s not easy, or sometimes even possible, to force tenants to reduce the amount of waste they produce.

It is possible, however, to increase the likelihood that they’ll do their fair share.

By providing composting areas for tenants, for instance, it’s possible to eliminate some of the waste generated in the average home by 25 percent.

Additionally, providing recycle bins can reduce waste even further.

In the end, these measures can result in substantial cost savings for landlords who pay for garbage collection by weight or volume.

There are countless environmental benefits of going green, but that’s not where the benefits end.

Whether a landlord is focused on saving money or saving the world, taking eco-friendly measures in their properties will help them succeed in their goal.

When your lease is silent or unclear

There are a lot of reasons landlords give tenants standard leases.

Sometimes it’s just faster and easier to use an existing or standard lease.

Standard leases help get a tenant in the space quickly, but they can also have drawbacks.

Even when a lease is customized to meet the needs of both landlord and tenant, unclear language or unforeseen circumstances can derail a smooth rental experience.

Before Signing a Lease

Many part-time landlords face these situations.

It is difficult to foresee in advance all the possible scenarios that may arise.

It is important to use a checklist of important issues relating to your property so you can make sure all those issues are addressed in the lease.

If you are using a standard lease, read through it to make sure that you understand what it is saying.

Don’t use language if you don’t understand what it means.  

Make sure you are familiar with your state’s landlord-tenant laws.

There may be laws that are automatically added into every lease.

The U.S. Department of Housing and Urban Development website contains links to current state laws.

For example, Florida’s laws can be found at the following location: http://portal.hud.gov/hudportal/HUD?src=/states/florida/renting/tenantrights

After Signing a Lease

You may need to amend your lease if you discover issues that need to be addressed.

You may need to define words in the lease or assign responsibility for maintenance of the property.

 If the change requires your tenant to do something that is not already required by the lease, the tenant must sign off on the change.  

The document that the tenant signs will then become a part of the lease.

If you and your tenant do not agree on the meaning of the lease or if the lease is silent, it is best to try to find a solution that is satisfactory to both of you.

 For example, If the dispute relates to repairs, you and the tenant could agree to split the cost of repairs or you could agree to rely on a decision of a third party as to who caused the damage.

Reaching an agreement allows you to preserve your landlord-tenant relationship, keep your rental income and avoid the time and expense of court.

If you believe that a lawsuit is your only recourse, then consider how a court would interpret the lease.

How Leases are Interpreted

In order to address these types of issues, it is important to understand how leases are interpreted by courts.

Some of the techniques courts use to interpret leases include:

  • The four corners of the document – What does the paperwork actually say regarding the disputed provision? Courts look at the whole document for answers, not only in the section that contains the disputed provision. Any specific details take precedence over any general language.
  • The intent of the parties – When the document itself doesn’t offer sufficient information, the court may be able to look outside the document for such information as the parties’ previous actions and other written communications between the parties.

Equally important is the need to maintain a good relationship with your tenant.

Tenants should feel like they are partners in the process of maintaining the property. Their involvement and interest in their home help landlords save time and money.

 

Property maintenance tips for a landlord

As a landlord, you are responsible for ensuring your rental unit is free of damage and maintenance problems. Routine maintenance can be costly, so it is important to find ways to save money. By performing routine maintenance, you can help ensure that a small problem is fixed quickly before it becomes an expensive and headache-inducing emergency.

1. Test Smoke and Carbon Monoxide Alarms Regularly

Not having a working smoke detector is a lawsuit waiting to happen. Ensure that this is never a problem by checking these alarms monthly. The best time to get permission from the tenant for access to the unit is when the monthly rent is due. Keep in mind that the average lifespan of a smoke detector is 10 years and a carbon monoxide alarm is five years, so record the purchase date to know when you’ll need to buy a replacement.

2. Be Vigilant in Checking for Leaks and Water Damage

Although the best time to check that there are no water leaks is just after a storm, don’t wait for a big storm to verify that your property is free of water damage. Prior to a tenant moving in or out, always do a complete inspection of the home or apartment to check for any new damage. If you spot anything, immediately contact a professional and inform the new tenant that they may have to wait to move in.

No matter what, always check the home after a torrential rain or wind storm. Look for signs of water collecting near windows, the shower and any sliding doors. Be sure to check the ceiling for any discoloration or signs of soft spots. If you do not address water damage in a timely manner, it can lead to the growth of dangerous mold.

3. Change the Air Conditioning and Heating Filters

To ensure that the air conditioning and heating units operate at peak efficiency, you should change the filters twice a year. To keep on a set schedule, change the heating filter in October when the weather is just turning cold and the air conditioning filter in March when spring is approaching. The dirtier the filter, the more the monthly utility bill will be for you or your tenant, and the more likely an expensive maintenance problem will develop in the future. If you are not responsible for paying utility bills, it is still important to change the filters because high heat and air conditioning bills may lose you some tenants.

4. Drain the Water Heater

Not draining the water heater can lead to the development of excess sediment that can clog the drain valve. Not only will this make the water heater less efficient, but it could also lead to needing to replace the entire unit. You can drain the water heater yourself but it’s important to read the instructions and labels carefully as to not damage the water heater.

5. Call a Professional

While you may consider yourself a competent repair person or want to save a little money, it is always best to hire a professional when facing a costly maintenance problem. Only a professional can fix the problem the first time or offer a guarantee if the work is not done correctly. For help in finding a qualified repair person, ask friends and families for references. Chances are good that if a neighbor or trusted friend is using the person then they will be reliable and reputable.

Five Strategies to Increase Tenant Retention

Just because a tenant’s signed a lease, doesn’t mean they’ll stay–keeping a good tenant around has a lot to do with being a good property manager. Being flexible and friendly, yet professional, is crucial to tenant retention. Here are five strategies to increase tenant retention.

1. Call 48 Hours Before Coming Over

Don’t show up unannounced. Nothing causes more frantic cleaning and a painful feeling of awkward invasion than a property manager who shows up without calling first. Many folks don’t even like friends stopping by spontaneously, much less a landlord interrupting their dinner party. It’s important and polite to respect people’s backgrounds and personalities. Calling 48 hours ahead of time is a safe time frame that allows them to adjust their schedule and prepare for the visit.

2. Allow (Reasonable) Changes to the Property

Good tenants care about the property they live on. When they move in, they look for desirable features in the property, such as landscaping and space for a garden or an area for children to play. They keep the property in good shape because they’re not just looking for a cheap place to rest their head, trash, and leave. They’re building a home and taking pride in its aesthetics and functionality.

To keep these tenants, it’s important to allow them to personalize the property, whether it’s through planting an apple tree on the sunny side, growing a luscious garden, or adding a tool shed out back. Not only will this increase tenant retention but it will increase the value of your property with minimal effort on your part.

3. Allow (Reasonable) Changes to the Interior

Good tenants–tenants who stick around–may want to do more than just hang up a poster. They might call you with ideas to paint a mural in the baby’s room or install a bar in the dining area. You can state in the rental agreement that the tenant must discuss or collaborate on these projects with you. Remember, a client who can get creative in building their home is a tenant who’s invested in it. This tenant is likely to stick around and re-sign the lease for years to come.

4. Be Prompt when Fixing Issues

While the aforementioned tenants who get jazzed up about installing a bar or planting an apple tree are likely to unclog their own toilets and change their own light bulbs, they might not have the time or inclination to fix bigger projects. If the stove or the sink is in a state of disrepair, it can throw a wrench into their busy schedule. If you’re prompt on fixing the sink when your tenants need you, they’ll stick around longer.

5. Be Flexible and Understanding

That being said, if the tenant gets laid off, a move to an apartment with lower rent will look appealing, even if their decrease in income is highly temporary. A good tenant will appreciate a good property manager–one who understands when times are tough and is willing to reduce rent for one month. Another kind and smart thing to do when a tenant is considering re-signing the lease is to offer a rent discount on the first month. Again, this will prevent them from moving, and save you the headache and income loss of finding a new tenant.  

Tenants who are treated like people with desires and needs will feel respected and valued. This will encourage them to be even better tenants because they’ll know they can invest in the property without fear of a picky property manager undoing their homemaking. If your final goal is to sell the home, these tenants could be the ones, if allowed to treat it as their own home, which it is, after all. Keep these strategies at the helm of your operations to ensure a long term, positive relationship with your tenants.

5 Property Management Bookkeeping Tips

The accounting of property management can sometimes get to be a bit complicated.

You’ve got security deposits to manage, certain fees that might be charged, utility bills that might be coming in that a tenant needs to pay – and there’s the rent, of course!

Each item generally needs its own line in a rental property’s annual budget and there may be certain responsibilities that must be accomplished by law for certain budget lines.

The first thing you must know is what must be done to store any security deposits or other required rental deposits.

Some jurisdictions require them to be stored in separate accounts from any profits that are received.

You may also need to notify tenants of changes to the account, who the account holder is, and how they can receive their security deposit back.

1. Know What You’re Required to Disclose

Some landlord/tenant laws require an itemized list of expenses and charges to security deposits or required repair bills a tenant must pay because they have violated the terms of the lease.

Other laws only require that the amount being held is disclosed by job and not a full outline of how the job is done.

2. Keep Your Documentation Clear and Concise

Tenants have the ability to challenge any charges against them if they believe that they aren’t fair.

This requires the property manager to know what going rates for services are in their community so that a fair labor charge is implemented.

If you hire someone who makes minimum wage and a tenant sees a $40 per hour labor charge on their bill, they’ll be able to challenge that charge in small claims court and generally win just by getting a lower quote.

3. Have Precise Procedures in Place if a Tenant Falls into Default

If your tenant is not paying the rent, you need to know this immediately so that you can do something about it.

You must have clear procedures in place for dealing with late rent and how you begin to start the eviction process.

If you treat households differently, then you are setting yourself up for a discrimination lawsuit that can be incredibly costly.

4. Rely on the Professionals

Landlord/tenant laws want to see that you’ve relied on accurate information as a property manager.

They don’t generally care if you’ve done the work or had someone else do it for you.

What needs to be proven is that you’ve done your due diligence to charge a fair rate. If your rental property needs to be cleaned and a licensed and bonded contractor would charge $40 per hour for 3 hours to clean the property up, the most you can charge if you do the work is $120 – even if it takes you 8 hours to get the job done.

5. Keep Every Property Separate

You certainly need to have an overall budget as a property manager, but every property needs to have its own budget line. Each property must also have line-by-line budget items that will help you to accurately track profit and loss so that you can keep up with your income ratios.

By taking these steps, you’ll be able to have a successful accounting experience with your properties and protect yourself legally.

That way you’ll always be able to maximize your revenue streams.