1. Take Pets – It always amazes me how few landlords are willing to take tenants with pets. There are two main reasons why ALL my rentals are pet friendly and full for that matter. For starters, tenants with pets have very few choices so not only does your phone ring off the hook from a carefully crafted ad with “Pet Friendly” in the headline, but they are way less likely to try and brow beat you on price when they come out. Tenants with pets also tend to stay longer for the same reason. Secondly, you get twice the deposit. BC tenancy laws say you can only ask for half a month’s rent as a security deposit. Welcoming “Spot” sweetens the pot with an additional half month. My experience with tenants is it’s not the pets we need to worry about damaging the place. In the event of a midnight dash or non payment of rent situation, you’ll be thankful for the additional two weeks revenue cushion.
2. Learn to spot the BS – A prime example of the kind of stuff you need to watch out for is the phony reference. This is where they put down their buddy as a past landlord. A simple way to counteract this little scam is to phone the number provided, but instead of announcing yourself as a landlord looking for a reference, call as if you were a prospective tenant. Say, “Hello I’m calling about your place for rent.” The friend that’s been prompted to tell you what you want to hear won’t see this coming and will respond with some kind of, “What the _____ are you talking about? “I don’t have a place to rent dude, wrong number.” – click. You see a real landlord would respond with one of two answers, either: “I’m sorry we are presently fully occupied” or say, “Yes what can I tell you about it?” At that point you know at least it’s a real landlord you’re dealing with and can quickly switch gears to get the info you are after.
3. Use TVS – Tenant Verification Services is the best thing to happen to landlords EVER. It creates some much needed accountability for tenants. Essentially it is a credit reporting agency that allows a landlord to report tenant behavior, good or bad. Delinquent tenants will find their score diminished while diligent tenants will have their scores rewarded and even receive a certificate of successful completion at the end of their tenancy, which is a reference on steroids. The best part of the entire system is the initial meeting with the client when you share with them that you belong to TVS and that their tenant habits are being recorded. They sign an acknowledgment and immediately realize you mean business. This one step alone prevents 9 out 10 issues from even occurring.
4. Have an on time payment “discount” – Sounds a whole lot better than a late payment penalty doesn’t it? Essentially it’s the same thing but it has one major advantage. Discounts can be taken away without increasing the rent. Landlords are restricted to very small annual rental increases. Sometimes in a good economy, the local rental market would bear a $200 dollar rental increase just to stay with the market. Unless the tenant vacates on his own, good luck raising the rent to what it’s worth. This could take 3-5 years depending on the price point. Now if at the outset you had set up your tenancy like this, you wouldn’t have that problem. For example: Tenant responds to an add for a suite for $1100/mo. When it comes time to do the paperwork and before the deposit is taken, you introduce the fact that the advertised rent was taking into account your $200/mo on time payment discount. “You do intend to pay on time correct?” “Absolutely!” they will respond. “Great, because $1300 is actually the amount I rent this suite for, but for all payments timely made, I am willing to extend this discount and you can see here on my agreement that I’ve put this in writing for the length of our term.” They will now be made aware that late payments do not benefit from your discount and the amount on the lease agreement is due for all payment made after the 1st. It is also noted that after two late payments, the discount is eliminated and the lease reverts to its $1300 amount. I’ve been using this strategy for two years now since learning about it through my involvement with REIN and have never had a single prospective tenant balk at this. In addition I have almost never had to impose the penalty. It works that well.
5. Learn how to advertise your properties properly – Now more than ever a basic understanding of where people go to find rental ads will be essential in remaining rented. Firstly, where to post your ads. This can be a zero cost endeavor that literally puts thousands of eyeballs on your property in the first week. Castanet is by far the cornerstone of any local rental marketing campaign. Next, Kijiji works extremely well and captures people moving to town from elsewhere. Craigslist does have a lot of horse power as well but definitely a distant third. After that a post on Facebook with a five dollar promo spend will yield about 1000 impressions. The social nature of the site will cause it to be spread to anyone looking for a new home. So that’s the where, now let’s speak in terms of how. There is a lot that goes into a well crafted ad, but for the purposes of being brief here are the 3 main points that are easy to implement:
- A strong Headline. This could be your only opportunity to capture your prospects’ attention. Don’t waste it with a dull headline. Humour works well here – anything to stand out a bit from the crowd. List your main differentiate in the headline too (huge fenced yard or steps to the beach, or pet friendly).
- Describe the property in terms of benefits to the customer. (ie: Unwind at the end of a long day in your soaker tub or, never hear your roommate snore with bedrooms on opposite sides of the home). You get the idea.
- Use Keywords. Weave into the headline and body of the ad some search friendly keywords so people using search engines will find you. People will “Google” in terms of what and where. (ie: Condo for rent downtown Kelowna). Put this phrase into your ad and it will rise to the top of Google very quickly. Kijiji especially is an SEO rock star for classifieds.
6. Preventive maintenance – It’s a part of the business, maintenance items will crop up. So now you have two options. You can wait for the disgruntled tenant to call you with the news that their _____ stopped working or their _____is leaking. These kinds of calls always seem to happen on a Saturday morning when you’ve got a day of boating planned with your friends or at 11 at night after a long day’s work and three glasses of wine. Never a good time. The other and much better option is to check in with your tenants about potential up and coming issues to get ahead of the issues. Inspect your properties regularly and take inventory of things coming up. As things reach the end of their lifespan you can pro-actively address them rather than being reactive. It’s counter intuitive, but preventative maintenance is actually easier on the pocket book. Emergency repairs often require additional service costs because they need to be done ASAP and you don’t have the luxury of shopping around. Where this really shows up on your books is the prevention of vacancies. Tenants of well-maintained properties tend to stay. Tenants that have things failing on them all the time tend to look for greener pastures. I learned this one the hard way.
7. Match your tenants wisely – This is applicable in the up and down or side by side duplex or suited house scenario. Anytime when two separate tenancies are sharing a wall or floor/ceiling you need to pay attention to how they mix. Sometimes just in an effort to get both of your suites full you will just take the first to come along. This kind of short term thinking can cost you nothing but headaches and create bank breaking vacancies. The single guy in his 20s beneath the family of five with three young kids bouncing, running and screaming will go together like oil and water. The older gentleman living above a couple of 20-something, girl roommates may seem like a great plan except the fact that the girls crank their Rihanna until 2 AM on weekends, and their friends cars block the poor guy’s driveway.
8. Treat them like a client – Start off on the right foot. Get them a welcome present. Remember their birthday. Check in to see if they need anything. Communication is key. When you honor your tenants with respect, they will reciprocate by taking care of the property and watching out for your investment. They will stay longer and if they do decide to move on they’ll give you plenty of notice and leave the suite in great condition. This is a huge piece of the puzzle and one that is missed 90% of the time. Far too often Landlords and Tenants take this adversarial approach and miss out on what can become not just a mutually beneficial relationship in business, but also a personal relationship as well.
9. Use a GOOD laminate floor – Don’t fall victim to the temptation to buy the 89 cent bargain laminate you see on sale at Home Depot. This stuff will spread, bubble and chip, and replacing it is a huge hassle. Invest a little more upfront in something that will pay off huge in the long run. There’s a great product at Costco for 1.74/sq.ft. It’s a 13 mm laminate that looks great, clicks together easily, comes with its own under pad attached, and best of all, stands the test of time. Not having to replace your flooring every other year is equivalent to eliminating two vacant months every year.
10. Understand Rent to Own – Funnily enough you can eliminate the need for any of the first 9 tips if you simply implement this final one. The best way to eliminate all of the risks associated with owning investment real estate is to utilize a rent-to-own strategy on any of your rental properties. Rent to own executed properly will yield a large deposit, higher monthly cash-flows and eliminate all maintenance and management. You almost completely remove the risk of vacancies. This enables you to achieve a premium sale price into the future that makes your return on the investment very worthwhile. The best part of the strategy is that you are helping people on the brink of success, people aspiring to become home owners that just need some time to get their down payment together or take care of some small credit challenges. As a licensed brokerage, Vantage West specializes in structuring win/win deals for investors and tenant/buyers that accomplish the dream of home ownership for one and a healthy return on investment for the other. I learned all of these strategies the hard way – through years of making mistakes and paying the price. As a result I have a very expensive education that finally led to a practical intelligence not taught in any classroom. My purpose now is to share what I have learned so that other Kelowna investors can experience all of the amazing aspects of owning investment real estate and immunize themselves the kind of thing that makes you want to sell in a down market. It doesn’t take very much additional effort to implement these strategies and making the choice can be the difference between an investment providing you with a 20% or better cash on cash return or an embarrassing headache that turns you off real estate forever. Good luck and of course feedback is always welcomed!Posted by AJ Hazzi on