Newsletter Archives
September/October 2004 August 2004 July 2004 June 2004 May 2004 April 2004 March 2004 Home | About Us | Contact Us | Landlord e-Guide | Landlord Forms |  | | Issue #10 | September/October 2004 | In this Issue: Tip of the Month
The Corporation vs. the L.L.C.
Question of the month
How to Get Started as a Landlord
What's HOT!
MyCorporation.com
The Internet's leading provider of Incorporation,
LLC Formation and Trademark Search Services | Welcome to the Landlord e-Guide monthly newsletter. Our mission is to provide useful information on ways to maximize profits and minimize risks as we help improve the way you do business as a landlord.
Note: If you have not done so already, please take a quick moment to add our newsletter e-mail address: [email protected] to your ISP address book in order to ensure being able to receive and view this and future newsletters.
My fellow landlords, I apologize for the delay in the submission of this month's issue which has now been combined with the October newsletter. Many changes are taking place at CompleteLandlord.com and we had been working ferociously to get them completed prior to the publication of this newsletter. But alas, I am a perfectionist and am not quite yet satisfied with the latest update of The Complete Landlord e-Guide (version 2.0) and the redesign of the CompleteLandlord.com website. We are also putting the finishing touches on the new Landlord's Resource Directory companion website which will have its own separate domain as of November 2004 at www.landlordsresourcedirectory.com. On top of all these exciting changes, I have been in the midst of working through some particularly challenging zoning issues with one of my rental properties. I am reminded of the immense responsibility of being a property owner and am ever grateful to have an extremely competent team of professionals helping me through it all. Property ownership and management is certainly not for the faint of heart! As always, I am quick to make this clear to people asking my advice because too many of them have a misguided notion that owning and managing properties is as simple as finding a good property and getting a good tenant. Although I'm not the pessimistic type, it would be a great disservice not to clarify the financial and emotional ramifications that are so much a part of investment real estate. For every landlord, each new tenancy comes with risks and rewards. Just as with anything in life, there will be good times and bad and although we can implement ways to protect ourselves from certain hardships, it's important to always be prepared for the worst. Once this is realized and accepted, the difficult times are more easily endured. As I have outlined the prerequisites to becoming a landlord in The Complete Landlord e-Guide, I hope to realistically illustrate the pros and cons of property ownership and landlording through this newsletter and welcome any comments on topics you would like to see covered herein. Make it a great day! Shannyn Flory Webmaster www.CompleteLandlord.com | Landlording Success
Awaits You...
Get started in 2 minutes!
Click here to learn more | Thank you for reading our complimentary "opt-in only" publication. If there is a topic you would like to see covered, I welcome your comments and suggestions. Please send an e-mail to [email protected] and let us know how we're doing! Do you know someone else who would be interested in this information? Forward this message to a friend or associate or direct them to: CompleteLandlord.com. To unsubscribe: Contact Us and enter your name and e-mail address and type "unsubscribe" in the comment box. Legal Disclaimer: This Newsletter includes comments and advice which is derived from the personal experiences and opinions of Shannyn Flory. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other professional assistance is required, the services of a competent professional should be sought. http://www.CompleteLandlord.com | Tip of the Month: Comparing Protective Business Entities The following article was published with the written consent of My Corporation Business Services, Inc. It is the second of two articles made available to you on the subject of creating a legitimate property management business. This article features the different characteristics of the Corporation and Limited Liability Company and will help you understand more about which one would better meet your own needs. For more information business entities, be sure to browse the MyCorporation.com website. The Corporation vs. the Limited Liability Company
The C-Corporation
The label, "C-Corporation" merely refers to a standard, general-for-profit, state-formed corporation. Characteristics of the "C-Corporation" include the following:
Separate Legal and Tax Life. A corporation which is properly formed and operated as a corporation assumes a separate legal and tax life distinct from its shareholders. A corporation pays taxes at its own corporate income tax rates and files its own corporate tax forms each year IRS Form 1120.
Management and Control. Normally, a corporation's management and control is vested in its board of directors who are elected by the shareholders of the corporation. Directors generally make policy and major decisions regarding the corporation but do not individually represent the corporation in dealing with third persons.
Thus, transactions with third persons and day-to-day activities are conducted through officers and employees of the corporation to whom authority is delegated by the directors of the corporation.
Shareholders. Shareholders are the owners of a corporation. Although shareholders have no power over the corporation's daily activities, shareholders possess the ultimate power in that they can appoint or remove Directors of the corporation.
Directors. The Board of Directors is responsible for the long-term management and policy decisions of the corporation. While the Directors are considered to have the highest level of DIRECT control over the corporation, there are, however, a few instances when the shareholders are required to approve Actions of the Board of Directors (e.g. amendment to the Articles of Incorporation, sale of substantially all of the corporate assets, the merger or dissolution of the corporation, etc...).
Corporate Officers. Corporate officers are elected by the Board of Directors and are responsible for conducting the day-to-day operational activities of the corporation. Corporate officers usually consist of the following: (President, Vice-President, Secretary, Treasurer).
Management & Staff. Management and Staff are DIRECTLY responsible for the daily activities of the corporation.
One Person Required. In most states, one or more persons may form and operate a corporation. Some states, however, require that the number of persons required to manage a corporation be at least equal to the number of owners. For example, if there are only two shareholders, there must also be a minimum of two directors serving on the board.
Fringe Benefits. Corporations may often offer their employees unique fringe benefits. For example, owner-employees may often deduct health insurance premiums paid by the corporation from corporate income. In addition, Corporate-defined benefit plans often afford better retirement options and benefits than those offered by non-corporate plans.
Corporate Formalities. To retain the corporate existence and thus the benefits of limited liability and special tax treatment, those who run the corporation must observe corporate formalities. Thus, even a one-person corporation must wear different hats depending on the occasion.
For example, one person may be responsible for being the sole shareholder, Director, and Officer of the corporation; however, depending on the action taken, that person must observe certain formalities: Annual meetings must be held, corporate minutes of the meetings must be taken, Officers must be appointed, and shares must be issued to shareholders.
Most importantly, however, the corporation should issue stock to its shareholders and keep adequate capitalization on hand to cover any "foreseeable" business debts.
Shareholder Liability for Corporate Debts. Where corporate formalities are not observed, shareholders may be held personally liable for corporate debts. thus, if a thinly capitalized corporation is created, funds are commingled with employees and officers, stock is never issued, meetings are never held, or other corporate formalities required by your state of incorporation are not followed, a court or the IRS may "pierce the corporate veil" and hold the shareholders personally liable for corporate debts.
Avoiding Double Taxation. Generally, the corporation is taxed for its own profits; then, any profits paid out in the form of dividends are taxed again to the recipient as dividend income and the individual shareholder's tax rate.
However, most small corporations rarely pay dividends. Rather, owner-employees are paid salaries and fringe benefits that are deductible to the corporation. The result is that only the employee-owners end up paying any income taxes on this business income and double taxation rarely occurs.
NOTE: See "The S-Corporation" below as a popular taxing alternative for corporations.
Duration of a Corporation. As a separate legal entity, a corporation is capable of continuing indefinitely. Its existence is not affected by death or incapacity of its shareholders, officers, or directors or by transfer of its shares from one person to another.
The S-Corporation
An S Corporation begins its existence as a "C-Corporation" (discussed above) -- (i.e. as a general, for-profit corporation upon filing the Articles of Incorporation with the appropriate STATE office. However, after the corporation has been formed, it may elect "S Corporation Status" by submitting IRS form 2553 to the Internal Revenue Service (in some cases a state filing is required as well).
Once this filing is complete, the corporation is taxed like a partnership or sole proprietorship rather than as a separate entity. Thus, the income is "passed-through" to the shareholders for purposes of computing tax liability. Therefore, a shareholder's individual tax returns will report the income or loss generated by an S corporation.
Qualifying for S Corporation Status. To qualify as an S corporation, a corporation must timely file IRS Form 2553 with the IRS. This election must be made by March 15 of the current year if the corporation is a calendar-year taxpayer in order for the election to take effect for the current tax year.
However, a "New" corporation may make the filing at anytime during its tax year so long as the filing is made no later than 75 days after the corporation has began conducting business as a corporation, acquired assets, or has issued stock to shareholders (whichever is earlier).
To qualify for S corporation status, the corporation must:
Be filed in one of the 50 United States. Maintain only one class of stock. Maintain a maximum of 75 shareholders. Be comprised SOLELY of shareholders who are individuals, estates or certain qualified trusts, who consent in writing to the S corporation election. NOT have a shareholder who is a non-resident alien.
Losing S-Corporation Status. Failure to observe ANY of the above requirements could revoke S-Corporation status at any time. An S-Corporation that loses its status as such may not re-elect S-Corporation status for a minimum of five years.
Corporate Formalities. An S-Corporation follows the same state formalities as does a C-corporation (i.e. filing Articles of Incorporation and paying state fees).
IRS Filings. The S-Corporation must complete and file IRS Form 1120s to report its annual income to the IRS each year.
General Shareholder Requirements. ALL shareholders of the corporation must be U.S. Citizens or have U.S. Residency Status. If, for any reason, shares are somehow sold or transferred (even if by will, divorce, or other means) to a shareholder who is a foreign national, the corporation will lose its S-Corporation status and be treated as a C-Corporation.
Who Should Elect S-Corporation Status? Owners who want the limited liability of a corporation and the "pass-through" tax-treatment of a partnership will often make the S-Corporation election. In most cases, corporations that would benefit from S-Corporation status are those who plan on distributing the majority of earnings to its shareholders in the year those earnings are realized.
Corporations who plan on retaining earnings for future investments in future tax years often choose the C-Corporation because, under the S-Corporation, earnings will be taxed as if they were distributed to shareholders regardless of whether a distribution actually occurred or whether the corporation retained the earnings for future investment.
The Limited Liability Company
Rules governing the Limited Liability Company (L.L.C.) are usually distinct from the rules and laws governing corporations. In general, however, the L.L.C. is a state-created entity intended to provide it's members / owners with the limited liability afforded to corporate shareholders while minimizing many of the formalities corporations are required to observe.
If you are considering forming an L.L.C., you should be aware of the following facts:
IRS Treatment of the Two-Member LLC. If your LLC has two or more owners, The IRS will tax the LLC owners as if the owners were members of a partnership. A partnership files Form 1065 (U.S. Partnership Return of Income).
IRS Treatment of the One-Member LLC. An LLC with only one member / owner is taxed by the IRS as a sole proprietorship is taxed. Thus, the sole member of an LLC will file (Form 1040), (U.S. Individual Income Tax Return) and will include (Form 1040, SCHEDULE C) (Profit or Loss from Business) with his/her tax returns.
"Tax My LLC as a Corporation!" Regardless of how many members the LLC has, the LLC may file an Election to be Treated as a Corporation for Purposes of Taxation (IRS Form 8832). If an election is made to be treated as a corporation, the LLC must file Form 1120 (U.S. Corporation Income Tax Return). IRS Form 1120, Form 1120 Instructions
Minimum Members Required by State Law. Traditionally, most states have required that an LLC consist of two or more members (owners). Recently, however, the majority of states are allowing single-member LLCs.
Separate Legal Entity Status. Similar to the corporation, an LLC is recognized as a separate legal entity from its "members." Thus, an LLC can own property, commit itself to contractual obligations, and even commit crimes.
Limited Liability for Members (owners). In most cases, only the LLC is responsible for the company's debts thus shielding its members from personal liability. However, there are some exceptions where individual members may be held liable: Guarantor Liability. Where an LLC member has personally guaranteed the obligations of the LLC, he or she will be liable. For example, where an LLC is relatively new and has no credit history, a prospective landlord about to lease office space to the LLC will most likely require a personal guarantee from the LLC members before executing such a lease. Alter Ego Liability. Where an LLC member has personally guaranteed the obligations of the LLC, he or she will be liable. For example, where an LLC is relatively new and has no credit history, a prospective landlord about to lease office space to the LLC will most likely require a personal guarantee from the LLC members before executing such a lease.
Fewer Formalities than the Corporation. Although a corporation's failure to hold shareholder or director meetings may subject the corporation to alter ego liability, this is not the case for LLCs in most states. An LLC's failure to hold meetings of members or managers is not usually considered grounds for imposing the alter ego doctrine where the LLC's Articles of Organization or Operating Agreement do not expressly require such meetings.
Shared Management and Control. Management and control of an LLC is vested with its members unless the articles of organization provide otherwise.
Voting Interest According to Ownership. Ordinarily, voting interest directly corresponds to interest in profits which directly corresponds to share of ownership unless the articles of organization or operating agreement provide otherwise.
Transfer Requires Majority Consent. No one can become a member of an LLC (either by transfer of an existing membership or the issuance of a new one) without the consent of members having a majority in interest (excluding the person acquiring the membership interest) unless the articles of organization provide otherwise.
Perpetual Duration. Traditionally, most states did not allow an LLC to have a perpetual existence; LLCs were traditionally required to specify the date on which the LLC's existence would terminate. Today, however, most states allow a perpetual duration for an LLC if stated in its articles of organization.
Dissolution Upon Certain Events. Unless otherwise provided in the articles of organization or a written operating agreement, an LLC is dissolved at the death, withdrawal, resignation, expulsion, or bankruptcy of a member (unless within 90 days a majority in both the profits and capital interests vote to continue the LLC).
Operating Agreement Required. To validly complete the formation of the LLC, members must enter into an Operating Agreement. This Operating Agreement may come into existence either before or after the filing of the Articles of Organization and depending on your particular state's laws, may be either oral or in writing.
Different Laws in Different States. While laws governing corporations have grown to be quite uniform amongst the different states over time, LLC statutes can vary quite drastically from state to state. This is most likely due to the fact that the LLC is a VERY new form of business structure only recently recognized by most governments (e.g. Hawaii only recently began recognizing the LLC as a legitimate form of business in 1997. Written by Joseph Mandelbaum, EA, CFP, Chief Executive Officer, RealTax, Inc.
Phone: 310-545-5400 Email: [email protected] http://www.Realtax.com | Question of the Month: Becoming a Landlord - How do I get started? Question:
I'm interested in buying rental properties and becoming a landlord but don't really know how to get started or what I need to do to be successful. Any suggestions? Brad Kingsley
Boston, MA Answer:
This is a very good question and one that deserves careful consideration. After all, your success begins with a vision! If your vision is to create a successful income producing real estate investment business there are four basic steps to achieving this goal. Setting Goals and Objectives - The first order of business is determining your personal goals and objectives. What do you want to achieve with your investments? Are you looking for immediate cash flow or are you more interested in long term appreciation? Do you have the financial wherewithal to endure the inevitability of periodic maintenance costs, vacancies and eviction fees? Are you aware of the responsibilities of being a landlord? The answers to these questions will require some thought and research and the help of some key people that will make up your management team. This includes a competent accountant, a real estate agent, a mortgage lender, an insurance agent and a real estate attorney. Determining Policies and Procedures - Once you have established what your goals are and have worked with your team of professionals on how to best achieve those goals, you will need to decide how you will administrate and oversee your property management business. You will need to research the laws in your jurisdiction regarding the landlord tenant relationship. Then, look at all your risks and structure a set of policies and procedures that will minimize them. How will you screen tenants? What forms will you use? As you work through these issues and create your lease and other forms, you will become very clear about your rights and obligations as a landlord as well as those of your tenants. Implementing Your Strategies - Now that you've set up the structure of your business, you're ready to implement your strategies and take on your first tenant! Your success will depend on the tenants you choose and how well you implement your policies and procedures. As a business manager, consistency and discipline are key! Despite your temptation to be sympathetic to your tenants, you will need to be disciplined about sticking with your plan. Remember, this is a business, not a charity! Monitoring Your Results - Especially as a "newbie", you will need to take the time every year or so to review your experience and results and determine whether or not your plan is working. If it isn't, you need to do some tweaking until you discover a process that works. Remember to focus on the long term results. Just like the stock market, bad experiences should not deter you from seeing the big picture. Be prepared for the periodic financial and/or emotional hiccups that are inherent in this business. Learn from your mistakes, make adjustments where they need to be made and press on! Your persistence will pay off in the end if you plan your work and work your plan!
I hope this is helpful to you Brad. Your purchase of my book, The Complete Landlord e-Guide will guide you with these steps and I will be happy to help as much as you need it along the way, so please don't hesitate to contact me again! Very sincerely, Shannyn Flory | What's HOT!
MyCorporation.com The Internet's leading provider of Incorporation,
LLC Formation and Trademark Search Services I discovered this company many months ago and after spending more than $500 to start a basic LLC through an attorney, I am impressed with their wide range of information and extremely affordable services they offer. If you're looking to form an LLC or research what entity will best work for you take a moment to browse their website. When you're ready to take action, I have arranged for a $20.00 cash discount for all my newsletter subscribers. Simply type in the coupon code below when placing and order!
MyCorporation Business Services, Inc. and its employees, agents, and assigns (hereafter MYCORP) are NOT engaged in the practice of law and cannot provide you with legal advice. MYCORP provides website publishing and secretarial filing and search services. If you should decide that your particular situation requires the rendering of legal advice, please contact a licensed attorney in the appropriate jurisdiction. | |
CompleteLandlord.com &
WayPoint Management Group
present
The Landlord e-Guide Monthly Newsletter | | Home Contact Us About Us Order Page Forms Packets | Issue #10 August 2004 Welcome to the Landlord e-Guide monthly newsletter. Our mission is to provide useful information on ways to maximize profits and minimize risks as we help improve the way you do business as a landlord.
Note: If you have not done so already, please take a quick moment to add our newsletter e-mail address: [email protected] to your ISP address book in order to ensure being able to receive and view this and future newsletters. My fellow landlords, I'd like to focus my attention for the next two months on the BUSINESS of being a landlord. That is to say, I want to clarify the importance and benefits of creating and acting as a legitimate business entity. Just as with any other type of business venture, being a Landlord requires that you define how you intend to do business. This includes more than just establishing your property management policies and procedures. You will also need to decide how your income property will be taxed, depreciated and how you will be protected from liability. In August and September I will include articles to illustrate the various types of business entities available in the US and how they will affect the aforementioned issues. For those foreign landlords, please use the following links to research the options in your jurisdiction: Now, let's see more specifically what this month's billboard has in store...Happy Landlording! Shannyn Tip of the Month: LLCs & Real Estate Question of the month: Deadbeat Tenants: What are my obligations? What's HOT!: MyCorporation.com
TIP OF THE MONTH LLCs & Real Estate:
Issues to Consider When Choosing a Holding Entity In order to be taken seriously as a real estate investor and manager the wise landlord realizes the significance of setting up a credible, professional and well protected business entity. My favorite form of business ownership for the small to mid-size investor is the Limited Liability Company (LLC) although the business form that's right for you will depend on many factors and should be discussed with a professional accountant or attorney and considered carefully. For more information on LLCs and other business entities, be sure to browse the following URL: http://www.mycorporation.com/llc.htm. Also, look out for September's tip of the month for more help on choosing the right type of business for you. The following article was published with the written consent of My Corporation Business Services, Inc. It illustrates some key points to consider when dealing with any type of investment involving real property. The property owner today faces many challenges including those of wealth creation, management, preservation and disposition. These challenges are made more difficult by current economic, legal and tax uncertainties which are increasingly more difficult to anticipate, comprehend and control. Nevertheless, in developing a property acquisition, ownership and disposition plan, the "choice of entity" question is one of the most significant decisions that the owner of investment property has to make and thus demands careful review and analysis. The choices of entities available to the property owner today are numerous. A list may be as follows. Individual Ownership  | Separate Property | | Tenants in Common | | Joint Tenants (WROS) | | Community Property |
Partnership Form | General Partnership | | Limited Partnership | | Family Limited Partnership | | Limited Liability Company |
Corporate Form | Subchapter S-Corporation | | C-Corporation | | Real Estate Investment Trust (REIT) |
Trust Form | Living Trust | | Land Trust | | Business Trust | | Bypass Trust | | Q-TIP Trust | | Disclaimer Trust | | Grantor Retained Income Trust (GRAT or GRUT or QPRT) | | Private Annuity Trust | | Foreign Trust | | Charitable Lead Trust | | Charitable Remainder Trust. |
The factors involved in the choice of entity decision are even more numerous. The following is a somewhat complete list and explanation of those factors that should be considered. Decision Factors New Acquisition or Existing Property: It is much easier and typically less costly to make the choice of entity decision at the beginning of the investment cycle. More often than not it can be as simple as specifying and/or negotiating the deal based on a specific entity taking title. Once you are invested, it often takes more money and the agreement by multiple persons (ex: lenders; investors; partners; spouse; etc.) to effectuate a change in ownership. Simplicity: Remember the old K.I.S.S. (i.e. Keep It Simple Stupid) principle? Believe it or not, that is still by far the most governing factor in making the choice of entity decision. People are more often driven by: Set Up: How easy is it to set up? If it requires an attorney, it's too hard! | Accounting: How easy is it to account for? If it requires maintaining a separate set of books or filing a separate tax return, then it is too hard! | | Operating Costs: How much $$ does it cost to operate? If there are extra filing fees or accounting fees or other entity related fees, then it's not worth it! |
Duration of Ownership: How long do you plan on owning the property? If it's "short term" then it is most likely not worth creating a special holding entity! However, if you plan on owning the asset a long time, especially if you plan on retaining ownership for several generations, then it's very worthwhile to set up a permanent holding entity! Limited Liability: How much personal liability do you expose yourself to from owning the property? Can you be sued due to the property and potentially lose everything else? Can you afford to lose the property because you are being sued somewhere else? Can you become an anonymous owner to prospective creditors? Location of the Property: Is the location of the property a limiting factor due to your domicile or residency? Are you limited by your State (ex: California) of residency and your State (ex: California) of investment from choosing a specific entity (ex: a Nevada Corporation or a one member LLC)? Source of Venture Capital: Where is the money coming from to pay for the investment? If it's a sizable loan financed by an institutional lender, are they insisting on a single-asset, bankruptcy proof entity like an LLC? If it's a passive investor, are they desirous of a Limited Partnership arrangement? Number of Owners: Your choices are also very much constrained by the number and qualifications of the owners. If it's only you investing, then some of the myriad of choices are not available to you! If you have foreign investors, then some of the other choices will not be available to you! | Centralized Management: If you, and you alone, want to make all the decisions, then a General Partnership will not do! | | Form of Compensation: If you want a preferred distribution of income but do not want that to be classified as earned income but only as passive income, then a C-Corporation won’t do! |
Income Tax Consequences: The income tax treatment of earnings, profits and losses may differ significantly from one entity to another depending on the choice of entity. The scrutiny given by various taxing authorities differ somewhat as well. | Lower Audit Profile: A Limited Partnership with multiple real estate assets worth millions of dollars which is generating hundreds of thousands of dollars of losses may be less prone to audit than a small apartment building generating a loss of tens of thousands of dollars. | | Double Taxation: Some choices of entity (ex: a C-Corporation) will obligate you to two layers of taxation. You are taxed once at the entity level, and once again at the individual level. | | Projected Income or Loss: Losses from certain entities (ex: Trusts) will not be available to you as an offset to income from other sources irrespective of the similarity in the quality of the income (ex: passive income). | | Special Allocation: Certain entities (ex: Partnerships) may allow you to differentiate the nature and amount of income and losses and preferences as they pertain and are allocated to the various owners/investors. | | Income Shifting: Investment in income producing assets, such as real estate, under certain entity forms (ex: Family Limited Partnership) will allow a family to successfully implement an income shifting strategy which will pass taxable income from high tax bracket family members to those in lower marginal tax brackets. |
Estate Tax Consequences: Transfer of ownership and wealth during life (inter-vivos) or after death (testamentary) can be facilitated or hampered by the choice of entity made. | Net Worth of the Owner(s): The net worth of the owner should be a determining factor. If there is not much equity or wealth then there is no need to set up complex structures. However, if there is a lot to protect then the entities are very important. After all, the amount included in a decedent’s taxable estate can be controlled and reduced (if not eliminated) by making the right choice of entity. | | Family Status of Owner(s): Discounting (i.e. Leveraging) of $10,000 annual exclusion gifts and minority interests can be leveraged to their fullest under certain forms of ownership. | | Discount Valuation Potential: Husband and wife inheritance issues; inheriting off springs from multiple marriage issues; and constraints on heirs with “bad habits” can all be taken into consideration within certain forms of entities (ex: Trusts). | | Ease of Transfer: Assignment of a fractional interest versus recording of deeds! |
Property Tax Consequences: Protecting low property tax assessments as assets are partially or fully transferred can have a significant monetary reward or cost! Etc...: Other considerations such as restricted transfers; related party transactions; fiscal or calendar year allowances; 100% deductible fringe benefits; step-up in basis at death; and the existence of reliable case law are but a handful of other factors that one can and perhaps should consider. Written by Joseph Mandelbaum, EA, CFP, Chief Executive Officer, RealTax, Inc.
Phone: 310-545-5400 Email: [email protected] http://www.Realtax.com | Question of the Month
Deadbeat Tenants: What are my obligations to them?
Question: Dear Shannyn, I have a question for you about my wife's rental property. She has new tenants who have been there for 2 months and they have never paid their rent in full. Now she is thinking of selling the place. Can she just list the property for sale or does she have to evict them first? Any suggestions on handling this situation? Tony
New Jersey Shore Answer: Hi Tony, In this case, I would serve them immediately with a Notice to Pay or Quit. Their payment history demonstrates either an inability to afford the rent, a disrespect for their contractual commitment, or both. In other words, they are NOT the kind of tenants you want. In this case, you may also want to give them a notice to terminate the lease which specifies that even if they pay the past due rent, you are still exercising your right to end the tenancy. Now you have to wait and see whether or not they will comply or if you will have to commence an unlawful detainer with the local court to get them out. In the latter case, it could take several weeks to get them out during which time they may discontinue any partial rent payments and may thrash the premises out of anger at you. If you are concerned about this you may want to offer them an incentive to move out quickly and peacefully. I once paid a tenant $100 in cash to move out and consider it one of the best decisions I ever made as a landlord. As far as re-listing the property for rent, you have two things to consider. One is that you don't know when you'll be able to give a new tenant occupancy. You don't want to sign a new lease and then get into trouble when the old tenant won't move out. Second, you need the current tenant's cooperation in showing the place and they may make it difficult to do so. As such, you may be wise to wait until you have your current tenant situation under control (i.e. they have either moved out or you have negotiated another peaceful remedy) before soliciting new tenants or buyers. I hope this advice is helpful. What you decide to do will ultimately be determined by your tenant's reaction to being evicted. Let me know if you need further advice on all this as things transpire. Shannyn | WHAT'S HOT MyCorporation.com, the Internet's leading provider of Incorporation, LLC Formation, and Trademark Search Services I discovered this company many months ago and after spending more than $500 to start a basic LLC through an attorney, I am impressed with their wide range of information and extremely affordable services they offer. If you're looking to form an LLC or research what entity will best work for you take a moment to browse their website. When you're ready to take action, I have arranged for a $20.00 cash discount for all my newsletter subscribers. Simply type in the coupon code below when placing and order! 
MyCorporation Business Services, Inc. and its employees, agents, and assigns (hereafter MYCORP) are NOT engaged in the practice of law and cannot provide you with legal advice. MYCORP provides website publishing and secretarial filing and search services. If you should decide that your particular situation requires the rendering of legal advice, please contact a licensed attorney in the appropriate jurisdiction. 
| Thank you for reading our complimentary "opt-in only" publication. If there is a topic you would like to see covered, I welcome your comments and suggestions. Please send an e-mail to [email protected] and let us know how we're doing! Do you know someone else who would be interested in this information? Forward this message to a friend or associate or direct them to http://CompleteLandlord.com/newsletter_sign-up.htm . To unsubscribe, Go to: www.CompleteLandlord.com/contactus.htm, enter your name and e-mail address and type "unsubscribe" in the comment box. Legal Disclaimer: This Newsletter includes comments and advice which is derived from the personal experiences and opinions of Shannyn Flory. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other professional assistance is required, the services of a competent professional should be sought. |
CompleteLandlord.com |
CompleteLandlord.com &
WayPoint Management Group
present
The Landlord e-Guide Monthly Newsletter | | Home Contact Us About Us Order Page Forms Packets | Issue #9
July 2004
Welcome to the Landlord e-Guide monthly newsletter. Our mission is to provide useful information on ways to maximize profits and minimize risks as we help improve the way you do business as a landlord. Note: If you have not done so already, please take a quick moment to add our newsletter e-mail address: [email protected] to your ISP address book in order to ensure being able to receive and view this and future newsletters. My fellow landlords, I've just returned from a much needed vacation to Cabo San Lucas, Mexico and am now ready to focus on the Version 2.0 updates to have available in the Fall. Due to many inquiries on Section 8 tenants and co-tenant or "Roommate" situations, I will adding more details on these subjects in the e-guide and on the companion website. I am anxious to hear from anyone on additional topics they would like to see covered so please don't hesitate to contact me at [email protected] if you have any landlording questions or comments about my book, forms or website. On that note, I want to thank those of you who have taken the time to share your thoughts with me. I enjoy hearing how much my products are helping you and am always anxious to converse with you on your personal situations so I can further your successes. I have a tremendously rewarding job that I absolutely love! I'm making this letter short this month so we can get right to the billboard. Meanwhile, I hope you are all enjoying your summer and taking some time out to enjoy it! WHAT'S NEW > | The Complete Landlord e-Guide Sale has ended. Congrats to those of you who took advantage of the sale pricing at $33.00. | > | Get a free update of Version 2.0! In our constant attempt to improve The Complete Landlord e-Guide, we are already working on Version 2.0 to be released in 2005. It will include several new landlord forms and bonuses along with additions to the e-guide text. We want to cover the most commonly asked management questions and don't want to miss anything that can help our fellow landlords. With that in mind, if you have a question that you would like to see covered in the e-guide, please click here to submit it. In exchange for your time, all previous e-guide purchasers will receive the update download free of charge as soon as it gets published. It will we well worth your while! |
Tip of the Month: The ABCs of Roommate Tenancies Question of the month: Selling a Rented Property What's HOT!: Net Quote - Minimizing Insurance Costs
TIP OF THE MONTH
The ABCs of Roommate Tenancies
Dealing with Roommates can be somewhat problematic if there is not a clear understanding of the issues and responsibilities involved in this arrangement. As a landlord, it is essential that you clearly understand the nature of a co-tenancy situation and explain it to each tenant prior to signing a lease. To further avoid co-tenant issues, it is an excellent idea to require that the co-tenants review and sign a Roommate Agreement (such as the one included in The Complete Landlord e-Guide landlord forms) and deliver a copy to you.
Another issue involves dealing with security deposits. It is important to clarify a strict policy that the security deposit shall remain the collective property of all co-tenants regardless of how it was originally paid. This means that when the tenancy ends, you have the right to make any refund check payable to all co-tenants (i.e. "John Doe, Jane Doe and Bob Smith"). This way, if there are any disputes over security deposit deductions for repairs, cleaning, etc., it will be the responsibility of the co-tenants to work out themselves and you can stay out of it. This also means that if one roommate wants to move out, and another wants to move in, you as the Landlord (after approving any such changes and creating an addendum to the lease) should not be bothered with having to refund a portion of the deposit to the old roommate and collecting the same from the new one. Again, make it the tenants' responsibility to work out the details. Otherwise, you are better off terminating the lease entirely, completing a formal move-out inspection, deducting for repairs or damages and refunding the deposit balance, etc. so you can start all over with a new lease for the new tenancy. This way you eliminate the chances of damage and other financial disputes down the road. As mentioned above, using a good Roommate Agreement will clarify these and other similar issues that often cause problems in multiple tenancy situations. It's an excellent policy to require roommates to review and sign one amongst themselves prior to signing the lease. A roommate agreement should define the following issues:
1. Rent. Specify how monthly rent will be shared and paid and who will be responsible for collecting those amounts and issuing one payment to the landlord on or before the rent due date. 2. Bedrooms. Determine how rooms shall be occupied. 3. Condition of the Premises. Clarify the expectations with regard to the physical upkeep of the property and the fact that all co-tenants may be held legally responsibility for damages regardless of who is the cause. 4. Utilities. Establish how payment of applicable utilities will be made. 5. Guests. Clarify that each co-tenant understands that they are responsible for the actions of all guests or invitees at all times and shall not allow another to take occupancy for any length of time without the written consent of all co-tenants and the Landlord. 6. Leaving Before the Lease Ends. Stipulate what the expectations are of a roommate who wants to leave including minimum notice, finding a replacement, and their financial obligations to the lease contract 7. Adding a New Roommate. Clarify that additional tenants approved by the remaining co-tenants shall be added to the rental agreement at the sole discretion of the Landlord and the vacating tenant may not be released from the lease until an acceptable arrangement is made. 8. Security Deposits. Make sure that all co-tenants understand that the Security Deposit is considered the collective property of all tenants. Disputes over distributions of the deposit shall remain the responsibility of the tenants and not the landlord. 9. Dispute Resolution. Understand that if a dispute arises concerning any aspect of the lease or the shared living situation, the Landlord shall not be involved in the remedy. 10. Violations of the Agreement. Stipulate how lease violations will be dealt with and any remedies co-tenants have against one another in the face of repeated violations by one tenant.
For additional information on co-tenancies, the following links from nolo.com also explain typical roommate issues: | QUESTION OF THE MONTH Selling a Rented Property Question: Can you please tell me if a landlord has the right to sell a property whilst the property is occupied....but not thereby terminating the tenancy. Must you wait for the tenancy to end prior to selling? Does the tenant have a right to say no to showings in that they do not want prospective buyers invading their privacy? Answer: Since I don't know where you live, I must caution you to check the laws in your locality on this subject but I will share with you my understanding of the law in most jurisdictions: Unless there is some legally binding agreement previously created to the contrary, as a landlord, you have the right to sell your property whenever you choose without regard to a tenant's opinion or preference. You do not have to wait to complete the sale until the tenancy has ended but the new owner will inherit the obligations of the existing lease contract. As long as your contractual obligations remain unbreached and there is no detrimental effect, there is no consequence to a tenant if the property title transfers to a new owner. The only thing that will change is the name of the payee on their rent check! Unless it is agreed to in the lease, a tenant does not have the right to terminate the tenancy nor prohibit the owner from showing the premises to prospective buyers as long as legal notice of entry during reasonable hours is given by the owner (usually 24-48 hours minimum notice). These issues should be at least generally clarified in your lease agreement. The relevant legal obligation you need to be concerned with as a seller is to disclose and clarify to prospective buyers any existing lease contract on the property since it will be transferable to the new owner and must be honored until it expires or both parties agree to terminate it otherwise. Now, having said all this, it is important to mention that having your tenant's cooperation during the sale process can be significant. If they make showings difficult by being unavailable, rude and/or purposefully leave the place in disarray for showings, this may reflect upon the marketability of your property and your capacity to maximize your sale price. In order to encourage your tenant's cooperation in this regard, you would be wise to consider offering a monthly rent discount of $50-$100 in exchange for any inconvenience and as an incentive for them to be accommodating and clean the premises prior to any showings. Also, make every effort to give them as much notice as possible before showings (48 hours is courteous) and clarify this arrangement with your real estate agent. Whenever possible, schedule multiple showings on the same day and/or create a pre-set schedule with the tenant. For example, you might agree to limit showings to Mondays, Wednesdays and Fridays from 10am till 2pm while the tenant is at work. This way, you are demonstrating your consideration and respect for your tenant's privacy and are making every effort to minimize any inconvenience to them. If you have questions on this subject as it pertains to the legal requirements in your area, I would highly recommend that you contact a real estate attorney for further advice. Shannyn | WHAT'S HOT
Minimize Your Insurance Costs
Maintaining a good liability insurance policy is essential to real estate investors as protection from the many types of lawsuits that are so popular in today’s culture. The cost of insurance can be excessive although its important to realize that insurance rates can vary considerably from year to year and from company to company.
It's wise then, to take the time to shop and compare your options each year. In my own search for insurance quotes I discovered NetQuote which provides up to 5 competitive insurance quotes within minutes. They offer quotes on other types of policies as well so you can research discounts on combining different policies such as homeowners, auto and business insurance to get further reduced rates. Discover How Easy Shopping Can Be Since 1989, NetQuote® has provided consumers with a free, simple, and effective way to fulfill their insurance shopping needs.
Free Quotes Available in All 50 States
NetQuote® works with hundreds of partner companies that provide insurance quotes based on information that you supply. "NetQuote helped me to cut my Auto and Home insurance premiums in half."
- Pam from Denver, Colorado
Click here to get your quotes on competitive homeowners policies. 
| Thank you for reading our complimentary "opt-in only" publication. If there is a topic you would like to see covered, I welcome your comments and suggestions. Please send an e-mail to [email protected] and let us know how we're doing! Do you know someone else who would be interested in this information? Forward this message to a friend or associate or direct them to http://CompleteLandlord.com/newsletter_sign-up.htm . To unsubscribe, Go to: www.CompleteLandlord.com/contactus.htm, enter your name and e-mail address and type "unsubscribe" in the comment box. Legal Disclaimer: This Newsletter includes comments and advice which is derived from the personal experiences and opinions of Shannyn Flory. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other professional assistance is required, the services of a competent professional should be sought.
(C) 2003 WayPoint Management Group, LLC http://www.CompleteLandlord.com |
CompleteLandlord.com &
WayPoint Management Group
present
The Landlord e-Guide Monthly Newsletter | | Home Contact Us About Us Order Page Forms Packets | Issue #8
June 2004
Welcome to the Landlord e-Guide monthly newsletter. Our mission is to provide useful information on ways to maximize profits and minimize risks as we help improve the way you do business as a landlord. Note: If you have not done so already, please take a quick moment to add our newsletter e-mail address: [email protected] to your ISP address book in order to ensure being able to receive and view this and future newsletters. My fellow landlords,Wow, what a delight to see the evidence of Spring in my garden as the days continue to grow warmer! June often brings a transitionary phase for many of us landlords as summer vacation starts and many people are looking to relocate. I find this time of year to be the busiest in terms of activity in the rental market so it is an ideal time to be dealing with a vacancy. It's also a good time to do a little landlord Spring cleaning as we often do in our own residences. It's essential not to underestimate the significance of keeping up on the care of your property in terms of maintaining it's appeal and maximizing future rent and/or sale potential. The coming of Spring is a great excuse to perform a perfectly legitimate annual property inspection - your opportunity to view your tenant's living habits and check for valid maintenance items such as replacing HVAC filters and taking care of lawn fertilization and sprinkler turn-ons. Be sure to send an inspection letter to your tenants in advance of your visit, scheduled preferably while they are gone which will minimize any opportunity the tenant may have to make frivolous complaints. Your notice should say something like this: "Dear Tenant(s), On Monday June 21st between 10 and 11a.m., an inspection of the property will be made. The purpose of this visit is to complete an annual maintenance inspection and to take note of and perform needed repairs and service items. There is no need for you to be present at this inspection. If you have any questions or concerns regarding this matter, please feel free to contact me. Thank you in advance for you cooperation."
If there are any concerns about the general condition of the premises, you will need to be prepared to notify your tenants and deal with any lease violations promptly and professionally. Remember, most landlord-tenant agreements require that the property be maintained in a clean and sanitary condition at all times and to keep things in good order, condition and repair. Don't be afraid to bring up any issues of concern that might cost you or the tenant in the long run if otherwise ignored. Well, with that, let's see what's on the billboard for June... WHAT'S NEW | > | The Complete Landlord e-Guide Deluxe package and Forms Packets now offered for less! Due to much sales success of the Complete Landlord e-Guide, the sale price of $33 has been extended one final time through the end of June. Click here for e-Guide Details | | > | Get a free update of Version 2.0! In our constant attempt to improve The Complete Landlord e-Guide, we are already working on Version 2.0 to be released in 2005. It will include several new landlord forms and bonuses along with additions to the e-guide text. We want to cover the most commonly asked management questions and don't want to miss anything that can help our fellow landlords. With that in mind, if you have a question that you would like to see covered in the e-guide, please click here to submit it. In exchange for your time, all previous e-guide purchasers will receive the update download free of charge as soon as it gets published. It will we well worth your while! |
Tip of the Month: Tenant Screening 101: Asking the right questions Question of the month: Negotiating a Win-Win Buy-Out Clause What's HOT!: Rent Recovery Service - A Landlord Collection Agency
TIP OF THE MONTH
Tenant Screening 101: Asking the right questions The wise landlord knows the importance of verifying information on the resident application as a key part of the tenant screening process. While there are many details that should be reviewed and scrutinized such as the applicants income and job history, nothing will tell you more than a conversation with their previous landlord. The following is a list of important questions that you may want to compile for yourself in a printed form as a companion to the application. Upon contacting the previous landlord, introduce yourself and explain that the applicant has applied to rent from you and has given this name and number as a previous landlord/property manager. Say that you are trying to determine what kind of tenant this person was and would appreciate if you could ask some questions: How long was this person your tenant? What were the dates of the tenancy? What was the rent amount? Were there other people living with this person? How many times did the tenant pay their rent late? Were they ever served with a late rent or eviction notice? If so, what was the result? Were they ever served with a tenant violation notice? If so, what was the result? Did this person give proper notice of their intent to vacate? Was this tenant reasonably clean and quiet? Did the tenant have any pets? Was the premises left clean and in good condition? Did you withhold any of their security deposit? If so, why? Did the tenant leave owing you any money? On a scale of one to ten, how would you rate this tenant overall? Would you rent to this person again?
The answers to these questions will tell you several things. First, if the answers to the first four questions cannot be verified during the time of the conversation, you will be alerted to the fact that this landlord reference is likely a bogus one. Unfortunately, this scenario is not uncommon to would-be deceivers who often con friends and family to help cover up for them in a desperate attempt to find another sucker of a landlord! Clearly, if you suspect that this is the case, you would want to reject the applicant immediately. Second, the answers given to questions 5 through 8 will say a lot about how well this applicant respects their contractual agreements and financial obligations. In the event that there were past tenant violations, consider how such violations were handled. If the defaults were minor and there is every indication that the tenant took care of any issues immediately rather than becoming angry and defensive, this could be interpreted as a good sign. After all, there will almost always be at least minor issues that come during a tenancy. How peacefully and quickly such issues are resolved can tell you much about a person's character. Third, the response to questions 9 through 13 will tell you about the applicants living habits. Information on security deposit deductions will give you an idea of how they will likely take care of your property as well. If there is mention of damages that indicate neglect or a blatant disregard for the condition of the premises, you will want to think twice about renting to your applicant. Lastly, questions 14 and 15 will help you determine how much risk you would likely be taking if you rented to this applicant. You might make it a policy not to rent to anyone who did not score at least a 7 out of 10 and of course, you would not want to rent to anyone who was not ultimately recommended by their previous landlord. Of course, there are many other considerations you will need to make when screening a potential tenant. However, the details you can gather from those with prior experience of their habits as a tenant will give you the clearest indication of what kind of landlord-tenant relationship you could expect to create. | QUESTION OF THE MONTH Negotiating a Win-Win
Buy-Out Clause Question:
Hello,
I am just about to renew my tenants rental agreement for year two and asked if they would be interested in signing a two-year lease...they are interested, but said they would like to include a "Move-Out" option....I came up with my own idea of a move out option for them, but they asked if we could simply put a "standard move-out" option in the lease..... I'm not sure what that is/means, etc..... any guidance that you could suggest would be appreciated! Also, the idea is that they would stay for the two years so I don't have to look for new tenants -- I don't mind keeping the rent at the same rate, but if they move prior to second full year then why do this??? Thanks for your help! Jodi
Baltimore, MD Answer: Jodi, I'm not aware that there is a "standard move-out option". This kind of thing would be whatever is mutually agreed upon between the two parties and could vary widely within any limitation of your local laws. I would actually refer to this type of agreement as a "buy out option". Effectively, it allows the tenant to take advantage of maintaining their current rental rate in exchange for a long term lease. In the event that they wanted to move out prior to the lease termination date, they would agree to compensate you for terminating the lease early. Typically, you as the landlord, would want to be repaid the amount of the rent reduction given under the premise of a completed tenancy. For example, let's say you want the renewed rental rent to be $825 but you agree to reduce it to $800 if your tenant signs a 2 year lease. You could add a buy out clause or an addendum to the lease that states that the tenant may give 30 (or 60) days notice of their intent to terminate the lease after the first year in exchange for paying an additional $25 for each month they remained in the premises prior to the termination date. So, if they stayed only 15 of the 24 months, you would charge them a $375.00 buy out fee (15 months x $25). This would compensate you for your losses and allow them to move out without further consequence. This is just an example of what terms you might negotiate. You can charge a flat fee, or a percentage or whatever else seems reasonable to everyone involved. Just keep in mind that you want the terms to be stringent enough to provide an incentive for them to stay through the full term, but worth it to them to sign in the first place. The previous example is a win-win for both sides. I hope this information is helpful Jodi. Let me know how things work out! Shannyn | WHAT'S HOT
A Landlord Collection Agency Contingency and Flat Fee Based Collections I often receive questions from landlords wanting information on how to collect from tenants and how to report them to the credit bureaus. Indeed, this is an important question since it affects us all as would-be landlords. Fortunately, technology and the Web now provides the means for us to quickly and easily report bad tenants and increase our collection potential at the same time. The reason modern collection agencies are so successful these days has to do with advances in electronic surveillance which can track down virtually anyone. Rent Recovery Service is an excellent resource for anyone struggling to collect from an elusive tenant. Here's why: Every judgment debtor is placed on a nationwide tracking system. This system allows us to follow their financial lives without their knowledge. If they attempt to get credit, purchase real estate, or apply for an apartment we are notified immediately. This remarkable monitoring system can even alert us if they have applied for a job or opened a new bank account. Rent Recovery Service is a division of Fidelity Information Corporation, a fully accredited collection agency. Rent Recovery Service has exclusively represented property owners and property management companies since 1991 and currently helps nearly 7,000 clients collect delinquent rent and other associated losses. As the largest and most aggressive landlord collection agency in the country, we have built a reputation that is unsurpassed. Our contingency based services include the successful retrieval of lost rent due to the relentless persistence of a highly trained, nationwide staff of private investigators, attorneys and professional collection agents. The Rent Recovery team has developed methods of asset location and confiscation, nationwide electronic surveillance and an asset flagging system that is rivaled by no one. Additionally, in conjunction with the major credit bureaus and a strategic alliance with the Delinquent Tenant Cooperative, every tenant submitted for collection will have their ability to rent elsewhere severely limited. Click here to learn more about our contingency based services. Our flat fee based service is available only on the Internet. It allows a property owner to immediately report a delinquent tenant to the credit bureaus and order a series of collection letters be sent by a licensed collection agency. Click here to learn more about our flat fee services.
www.abadtenant.com
| Thank you for reading our complimentary "opt-in only" publication. If there is a topic you would like to see covered, I welcome your comments and suggestions. Please send an e-mail to [email protected] and let us know how we're doing! Do you know someone else who would be interested in this information? Forward this message to a friend or associate or direct them to http://CompleteLandlord.com/newsletter_sign-up.htm . To unsubscribe, Go to: www.CompleteLandlord.com/contactus.htm, enter your name and e-mail address and type "unsubscribe" in the comment box. Legal Disclaimer: This Newsletter includes comments and advice which is derived from the personal experiences and opinions of Shannyn Flory. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other professional assistance is required, the services of a competent professional should be sought.
(C) 2004 - 2008 LandlordSoftware.com LLC CompleteLandlord.com |
CompleteLandlord.com &
WayPoint Management Group
present
The Landlord e-Guide Monthly Newsletter | | Home Contact Us About Us Order Page Forms Packets | Issue #7
May 2004
Welcome to the Landlord e-Guide monthly newsletter. Our mission is to provide useful information on ways to maximize profits and minimize risks as we help improve the way you do business as a landlord. Note: If you have not done so already, please take a quick moment to add our newsletter e-mail address: [email protected] to your ISP address book in order to ensure being able to receive and view this and future newsletters. My fellow landlords, With each month that passes, I am always delighted to expand upon my own knowledge and understanding of the landlording business as I help others with their individual questions and predicaments. I too have had many uncomfortable situations as a property owner and manager. I am grateful for these trials because they have given me wisdom and clarity that I would not have achieved otherwise. I wish I could go through the rest of my career without dealing with another tenant related problem, but I know that's unrealistic. The fact is, there is no book, course or amount of experience that will teach everything there is to know about being a landlord. Each of us will need to keep up on the ever-changing laws and dynamics of the landlord-tenant relationship. Yes, we can minimize potential issues by staying educated and by learning from past experiences, but there will always be some new, unique situation on the horizon that will open our eyes yet again to something we had not previously considered. And so, as with any business, there will always be the need to solve problems. The trick is to expect them and then to maintain a sense of control over them in the knowing that a solution awaits you. It is easy to get discouraged by a daunting tenant issue, especially when it involves financial losses or the stress of a legal dispute. But, like investing in the stock market, if you stay in the game and use what your experiences teach you to your advantage, you will prosper in the end. In my everyday research, I am continually amazed to find an ever increasing abundance of wonderful resources on the internet. It's true what they say, "knowledge is power". Taking in information on a weekly or monthly basis is like exercise - it will strengthen your abilities as a landlord. With that in mind, I am continually adding new site links to the Landlord's Resource Directory and to future updates of the e-Guide. I encourage you to take the time every so often to browse through the Landlord's Resource Directory to check out topics of interest or that you don't know much about. Join relevant landlord organizations and subscribe to newsletters. Be eager to learn how our industry is changing with the latest technologies in this Information Age. There is much to know about being a landlord, owning your own business, tax and accounting issues, legal remedies, etc. that will improve you financial viability as a landlord, property owner and business entrepreneur. Taking in tidbits here and there is what will help make your learning curve more manageable and constant. Speaking of taking in information, I am always anxious to hear from users of my website and products who are willing to give me feedback on how and where I can make improvements. This is my contribution to the empowerment of landlords - to provide the most accurate and user friendly resources possible that will save you time, money and risk. In that effort, I will continue to provide the latest and greatest information via this newsletter, that are of particular importance in the areas of landlord-tenant law, business ownership, pertinent tax and accounting information, rental strategies and more. Additionally, as with any software product and informational website, periodic download updates will be introduced from time to time for purchasers of the e-guide and forms packages. For example, recently, we have made some changes to the file set up of our downloads and have worked out some kinks with forms that were brought to our attention. (More on this in the What's New section.) Again, I look forward to hearing from anyone who has suggestions or comments on improving our products and/or website. You may contact me by e-mail directly at [email protected] or use the Contact Us link on the CompleteLandlord.com website.
Now, let's see what's on the May billboard...
WHAT'S NEW | > | The Complete Landlord e-Guide Deluxe package and Forms Packets now offered for less! Due to much sales success of the Complete Landlord e-Guide, the sale price has bee extended and increased through the end of May. If you haven't already done so, be sure to take advantage of the latest sale price which has been dropped more than 30% from $47 to $33! In addition, the Landlord Forms Packets are now offered with both PDF and Microsoft Word formatting at one low price! Click here for e-Guide Details or Click here for Forms Packet Details | | > | Updates available! Thanks to user feedback, we were able to make some fixes and improvements to the formatting and content of the landlord forms (i.e., the Landlord-Tenant Rental Agreement form). Those affected are purchasers of The Complete Landlord e-Guide, Tenant Move-In Packet and 2-in-1 Packet. If you purchased one of the above and did not receive e-mail instructions on obtaining your free update, please Contact Us and we will forward the information to you immediately. |
Tip of the Month: Determining Rental Rates and Security Deposit Amounts Question of the month: Landlording 101 - 10 Basic Answers to 10 Typical Questions.
TIP OF THE MONTH Determining Rental Rates and Security Deposit Amounts The following is an excerpt from The Complete Landlord e-Guide Version 1.5: Determining Your Rental Rate Figuring out the appropriate amount of rent for your property requires a little research to discover the range of pricing similar properties in the same area are generating. The easiest way to determine this is to look in the advertising section of your local paper, which should give you a range of value to start with. You may even want to drive-by or view other rentals to really get to know your competition. From there you can make adjustments for differences in square footage, bedroom and bathroom count, location, amenities, condition and utilities. (Note: Be sure to compare like properties; A 2 bedroom 1 bath home does not compare to a 3 bedroom 2 bath home, even if all other things are equal.) How much to adjust for differences in amenities and size will differ from market to market although the classifieds section of local newspapers and other publications should give you most of the information you need. If you are still unsure, contact an area landlord association (check your state listing in the Landlord’s Resource Directory) or call a local property management company on a comparable property advertisement and inquire about the range of value and the current market supply for similar units. Once you have a range of value you’ll need to factor in other considerations in order to choose the best price for your property. For example, if you are leasing a property in a high vacancy market with an abundance of similar properties available in your area, you may want to advertise at the lower end of your range. Conversely, if you are in a low vacancy market and/or have a property that is in high demand, you could advertise on the high end. In any case, given a specific range of value, where to set your rent will be significant. Let’s look at examples of extremes on either end: Let’s say you have determined the market rent of similar properties in the same area to be renting between $625 and $675 per month. Option A: You advertise your property just below the low end of the range at $620 per month. Consequently, you get a lot of interest and rent the property within a week. Option B: You advertise at $675 per month. Interest is sporadic; you get a few inquiries and spend a lot of time showing the unit over the next several weeks. After 6 weeks, you finally get it leased for your asking price. Let’s look at the results 12 months later: Option A: Gross rents are $7,285, and advertising costs were $50, time and stress to rent were minimal. Option B: Gross rents are $7,087.50, advertising costs were $200 and time and stress to rent were high. Despite what you might think about getting top dollar for your rental, this example clearly illustrates which of these leasing strategies works best in the end. Now, these are extreme examples and your results may vary considerably with either strategy depending on current market factors, but the point is, less is sometimes more! Offering financial incentives is another option to consider when determining your rental rate. We will discuss this in more detail later in this section. Security Deposits and Pre-Paid Rents There is often confusion about security deposits and pre-paid rent, which should be considered two very separate things. Contrary to popular belief, the purpose of the security deposit is for the faithful performance of the rental contract and for cleaning and repairs for damages by the tenant. It is not necessarily meant to be used toward the payment of rent. Your state or local jurisdiction will dictate specifically how security deposits may be applied. In any case, if it is legal and commonplace in your jurisdiction, you may require a separate pre-paid rent deposit to be applied toward the last months rent. This is especially wise if you are leasing to someone with a poor credit history or a questionable ability to pay the rent. Since security deposit and pre-paid rent amounts vary depending on local statues, market standards and the risk factor of the tenant, you should research the market to see what is appropriate. Reasonable amounts can range from a few hundred dollars to 3 times the monthly rental rate. As with researching market rents, For Rent advertisements, real estate associations and other property managers in your area are the best sources of information on this subject. ! Be sure to check your local statues to determine whether or not you are required to pay interest on amounts held at the end of the lease term. | QUESTION OF THE MONTH Landlording 101: 10 Basic Answers to 10 Typical Questions Question:
Hi Shannyn--What do you think about landlords assn's? I was thinking about joining and wondered what u thought about them. Also, since landlords don't just show their properties for the heck of it..how could I see some other properties to compare mine ...for pricing purposes? I wondered if you give receipts for rent paid and /or a bill? How do u collect rents? How often do you visit your property? Where do you conduct your interview and signing of the rental agreement? Do you visit their current home? Do you put your personal address on mailings to the tenants? When do you consider payments late? What do you do then? Do you offer any incentives to paying on time? I think that is all--sorry so many questions.!
Sincerely, Nancy Answer: Wow Nancy, that is a lot of questions - but they are important ones! I will answer them one at a time: 1) I think joining associations is an excellent idea and highly recommend it. You will get a ton of free advice, forms, and great referrals from people like you who are eager to share their knowledge and personal experiences. Many associations also organize great speakers on all sorts of pertinent issues to further your education as a landlord. (Check the Landlord's Resource Directory for listings in your area.) 2) As far as seeing comparable rentals, I think you'd be surprised at how many fellow landlords would be eager to help you in this regard. Yes, technically, you are in competition with them, but if you ask in a polite way and explain your situation, most people will appreciate your honesty and will be accommodating. After all, many of these same people were in the same boat once. They may even be part of a landlord's association and would be happy to share their knowledge. In any case, the good news is, you will really only need to do this research once. Eventually, you will become familiar enough with your market and pricing strategies that you'll be able to figure things out on your own. 3) I don't give receipts unless a tenant pays in cash and/or requests one. In most cases, their cancelled check is sufficient proof of payment. In cases of paying move-in costs (the security deposit and first month's rent), your lease may suffice as a legal deposit receipt. In fact, in this case, you have to be careful that you do collect what is itemized on the lease lest you be liable for any deficit. 4) Generally, I collect rents through the mail at my business P.O. Box address and/or at my physical office address. In the past, I have also listed my home address for payments as well. As far as having to give out your personal address, it would be a good policy that you rent only to people with whom you feel comfortable knowing where you live (i.e., to deliver rents that weren't mailed on time). In short, the answer to this question is really a personal one and will have to be determined by your own comfort level. In my recent personal experience, I maintain only higher quality rentals that tend to attract the kinds of people I can trust. 5) I don't have a specific schedule about visiting my properties. Generally, there is some reason why I need to go there or am in the vicinity so I do a drive by every few weeks or so. As far as seeing the interior, I don't - unless there is a need to do some repair or talk to the tenant about something. Legally, you can't just pop in unless you have a specific reason (although it's easy enough to create one if you really want to). Remember Nancy, the idea is that if you screen your tenants well and collect the appropriate security deposits, you won't need to worry about these issues. It also illustrates the benefit of being selective with your applicants by following strict policies and waiting as long as it takes for the right tenant. The value of a good tenant has as much to do with eliminating stress as it does securing the rental income! 6) The opportunity to "interview" applicants is definitely at the showing of the property. Beyond that, it's usually by phone and through checking referrals from employers and past landlords. I have not made visiting their current home part of my own screening procedures (although I think it is an excellent idea to do so!) but I do take notice of the condition of their car which is a similar indicator. On that note, I also make a point of meeting and observing any animals prior to approving them so there is no misunderstanding on that issue. 7) The lease signing can be done anywhere that is convenient including at your home, office, at a restaurant or coffee house. If I am giving them occupancy at the time of the signing, I will generally meet them at the property so we can exchange keys for money afterwards. I then mail a copy of the signed lease within the next day or so. I have never had a tenant be uncomfortable with that since they have been given a key and other supporting evidence (the property inspection form, etc) which is ample evidence that a rental agreement has commenced although you could also bring two copies of the lease to be signed and give them one. 8) I consider payments late if they are not made on the due date. That is to say, if the due date is the 1st, it is late as of midnight. I make this very clear to my tenants at the lease signing and explain that although there is a grace period before a late fee is assessed it should not be interpreted as a five day payment window. In reality, I am pretty tolerant of receiving rent payments anytime within those five days but giving the impression that your have a strict policy on this issue is a statement of intolerance for lease violations as well as a way to get the rent paid on time. It is a policy that will serve you well, especially if you have a mortgage to pay. TIP: If you make the rent due date the 25th of the month with a 5 day grace period, you will further increase your chances of getting paid by the 1st . 9) I don't offer incentives for paying on time although I think it can be a very effective strategy for some tenants and have seen it work very well - especially for landlords who have a lot of tenants and want to minimize collection efforts. It is also an attractive offer in a competitive rental market where you need to create an incentive for people to rent from you versus other comparable units. You might try it out to see how it works! 10) Regarding late tenant payments, you need to establish what your procedures will be and stick to them. For example, you might explain at the lease signing that if the rent is not paid on the due date, you will give them a friendly reminder call (just one - no need to harass them). If the rent is not paid by the end of the grace period, you should deliver a notice to pay or quit the next day and request that they contact you immediately. If they do not respond within 24 hours, forward the eviction notice to your attorney and prepare to file for an eviction hearing as soon as the legal notice minimum time period has passed. You will find that most tenants will respond very well to strict collection policies in order to avoid problems. Anyway, let me know if you have further concerns on this subject and I can give you more situation specific advice. Well Nancy, I hope I answered all your questions for now. Let me know if you have more! Shannyn | | | Thank you for reading our complimentary "opt-in only" publication. If there is a topic you would like to see covered, I welcome your comments and suggestions. Please send an e-mail to [email protected] and let us know how we're doing! Do you know someone else who would be interested in this information? Forward this message to a friend or associate or direct them to http://CompleteLandlord.com/newsletter_sign-up.htm . To unsubscribe, Go to: www.CompleteLandlord.com/contactus.htm, enter your name and e-mail address and type "unsubscribe" in the comment box. Legal Disclaimer: This Newsletter includes comments and advice which is derived from the personal experiences and opinions of Shannyn Flory. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other professional assistance is required, the services of a competent professional should be sought.
(C) 2003 WayPoint Management Group, LLC http://www.CompleteLandlord.com |
CompleteLandlord.com &
WayPoint Management Group
present
The Landlord e-Guide Monthly Newsletter | | Home Contact Us About Us Affiliate Program Order Page Forms Packets | Issue #6
April 2004
Welcome to the Landlord e-Guide monthly newsletter. Our mission is to provide useful information on ways to maximize profits and minimize risks as we help improve the way you do business as a landlord. My fellow landlords,Welcome to Spring! I hope you too are eagerly anticipating feeling a little more jump in your step as the weather improves and the flowers start to take bloom! In my enthusiasm, I have devised a plan for a personal situation of mine that I'm excited to share with you regarding attracting (and keeping) good tenants (which, consequently, I have chosen as the Tip of the Month). Recently, I've been involved in the purchase of some new rental properties for a family member and have also been working with the owner of a property management firm on creating effective incentives to attract new tenants this Spring. (Yes, in the case of this family member who will be an absentee owner and has no real interest or experience being a landlord, I have hooked her up with a good local property manager to take care of things for her.) The housing market in Boise, Idaho, where the rental properties are located, is experiencing a rental vacancy factor of 12% these days. This is the highest rate I have experienced in my career here - attributed to a surplus of housing coupled with the low interest rates that are enabling many would-be tenants to become property owners instead. As a result, property managers are using incentives to lure new applicants such as reduced and/or free rent offers. In an effort to stand out above the competition, we came up with a unique, value-added incentive that will appeal to the type of tenant we are looking for. First of all, we are implementing a strategy that I have practiced successfully for years with regard to setting the rent price. Each time I prepare for a new tenancy, I research the current rental range for similar properties and set my asking price at the lower end of the range. This way, potential residents are more likely to find my unit more favorable when comparing it to others they've seen and coupled with my other incentive, creates a sense that my place is "a steal" that won't last long! In my experience, giving up a little bit of the potential rent income ($50/month) saves me time, money and hassle since it enables me to fill a vacancy in significantly less time than I would otherwise. The second idea we came up with is one that is specific to the needs of the property owner, the type of properties involved as well as to the current time of year. I had recommended to my family member that in order to maximize the rental and eventual resale potential of the properties, maintaining their street appeal, particularly the exterior landscaping is essential. Since this is a task that many tenants would gladly forego, we came up with the idea of including "professional landscape maintenance" (weekly mowing, periodic fertilization and weed control) in the rent price. We may be able to reflect a portion of this expense in the rental rate but the advantage is that it's a seasonal, fixed cost unlike the inclusion of utilities. We anticipate that applicants will love the idea of not having to hassle with the maintenance themselves, plus they will have the benefit of a professionally cared for exterior throughout their tenancy. Furthermore, we are interested in attracting the type of tenant that values a well kept property. We anticipate that this will be perceived as an especially valuable and attractive incentive coming into Spring and I expect it to work like a charm in getting these properties leased up quickly! I hope this idea will add to your own creativity in developing tenant incentives. Of course, you will need to consider specific aspects of your own market and of your property to come up with ideas that are unique and appealing. In combination with the strategies included in this issue's Tip of the Month, you are bound to have much success! Now, let's see what's on the April billboard... WHAT'S NEW! This Spring brings a few special treats at CompleteLandlord.com. If you haven't done so already, you may want to take advantage of: | > | The Spring Sale on The Complete Landlord e-Guide Deluxe package! For the month of April, the price has been dropped more than 20% from $47 to $37! | | > | The addition of Landlord forms in Microsoft Word®! Now the forms are available in a customizable format so the text (not just the form fields) can be edited. As of April 1st, all e-Guide and forms packages have had this option added! Check the Forms Packets page and The Complete Landlord e-Guide Order Page for more details. |
And don't forget about our other new features and special offers that were added to our site in March: Tip of the Month: A recipe for attracting and keeping good tenants Question of the month: Drawing the line on dogs What's HOT!: ServiceFirst Solutions - Online Payment Processing for Landlords and Tenants
TIP OF THE MONTH
A Recipe for Attracting and Keeping Good Tenants 1) CREATE AN EFFECTIVE AD CAMPAIGN Right now there may be dozens of potential tenants out there who are looking for a place like yours to rent. You can advertise in the newspaper, on billboards or on the Internet however, you may be wasting your time and money advertising to people who either aren't interested in what you have to offer or aren't qualified to meet your minimum tenant standards. A good "ad campaign", on the other hand, lets you pinpoint and attract just the kind of tenant you're looking for! In order to devise an ad to meet your needs, you must first identify and understand your ideal tenant, and then strategize the best way to find them. Step 1 - Identify and understand your ideal tenant An advertisement works best when it appeals to the type of tenant you are looking for. So before you decide what information to highlight, consider for a moment the best tenants you've had or could have. Think about what characteristics you value in an applicant. Step 2 – Create effective advertising Once you've identified qualities of your best tenants, think about what they have in common and what factors contributed to their tenancies being so successful. What did you have to offer them? Assessing this information will help you decide how to target your rental ads. For example, let's say you've determined that your ideal tenants have almost always had small children, owned a small animal and worked in the nearby business district. A good strategy then would be to advertise benefits that appeal to those types of applicants such as "Near Park", "Pets OK" and "Close to Downtown". Step 3 - Find "model" tenants Once you've identified some advertising strategies to attract your ideal tenant, you will need to consider the best medium to reach them. One idea is to ask an ideal current or past tenant to post an ad for you at their place of work or college bulletin board where there may be more of the same types of people looking for housing. You may even offer a referral fee to anyone who sends an acceptable applicant. Step 4 - Continually expand your "model" tenant ideals Identifying common characteristics of good tenants is not an argument for discrimination. As we are reminded by the federal anti-discrimination laws, don't ever judge a book by its cover. You would be wise to remember that the more you are able to expand upon the qualities and characteristics of good tenants, the more of them you will be able to target and attract. In short, you want to spend some time identifying your ideal tenant, creating effective advertisements or flyers that will attract them and then determining the best ways to get your listing in front of people who will most likely desire the amenities you offer, want to live in your area and who can afford your rent. 2) TELL IT LIKE IT IS Once you have found your ideal tenant, you will need to have a plan in place to nurture a healthy landlord-tenant relationship. First and foremost, you need establish a very clear understanding about what you expect of the tenant and what they can expect from you. Take your time going over the lease, explaining the most potentially problematic issues such as the rent due date, late fee assessments, lease violations, notices and remedies, reporting repairs and maintenance, entry and inspection situations, move-out procedures and security deposit refunds. You want to be clear about your strict adherence to your policies and procedures but also sure to illustrate your respect for your tenant's rights and needs as well. This sets up a friendly and professional atmosphere in which you can both thrive. 3) PRACTICE WHAT YOU PREACH Having clear communication with your tenant is only part of the equation on keeping good tenants. Another consideration is that you consistently practice what you preach. For instance, if you're policy is to assess a late fee on the 6th of the month, resist the urge to waive the charge for the first time "out of courtesy". On the contrary, being strict with your policies will send a very important message to your tenant about taking the terms of the lease seriously and will be a significant factor in avoiding problems in the future. The minute you demonstrate flimsy boundaries, especially in the beginning of the relationship, the more likely a tenant will be to take advantage of you in any and all situations they can. The time to show leniency, if ever, is after your tenant has demonstrated responsibility and respect for the lease terms in the past. 4) MAINTAIN COURTEOUS PROFESSIONALISM One last suggestion that will earn you respect and loyalty from your tenants is the ability to always be courteous and professional. This means: § While you will want to be friendly with your tenants, do not become their "friend". Remember: it's difficult to evict a "friend". § Avoid getting emotionally involved or arguing with your tenants. If an uncomfortable situation arises, make all communications in writing and stick with the facts. § Deal with issues that arise and deal with them in a timely manner. This includes, dealing with repair and maintenance items or returning not-so-urgent phone calls. The more you show your respect for your tenants' time, privacy and personal needs and comfort, the more likely they will reciprocate. § Once a tenant has demonstrated a consistent respect for you and the terms of their lease, reward them by going out of your way to accommodate them when the need arises. Use opportunities (such as minimizing or eliminating annual rent increases) to develop a mutual trust and appreciation that will ever increase your tenant's happiness and desire to stay. This will make you more money in the long run! Being conscientious about how to attract and keep good tenants will make a significant difference in your experience as a landlord. Pay attention to what tricks of the trade work well for you and use them as opportunities to achieve more and more success in attracting long term, loyal and happy tenants. This is a win-win situation for all and will significantly improve your experience as a landlord, not to mention your pocketbook! |
QUESTION OF THE MONTH
Drawing the line on dogs Question: My tenant recently acquired a Pit-bull. We had ok'd her to have a small dog and now she has a pit-bull. There is a fenced in back yard but it is not that tall and we are concerned that we may be liable if it gets out and attacks someone. Are we? Also, she complained of rodents around the house and when we went to inspect the problem we noticed feces all over the back yard. Is there anything we can do about this problem? We don't have a "no dog" policy so any advice would be appreciated. Jeanette
Seattle, WA Answer: Hi Jeanette, Animals are a bit of a sketchy issue and your situation is a good example of why. Your concern over the liability issue of the dog being potentially violent is extremely valid and wise and is definitely a reason to nip this situation in the bud immediately! Yes, you could be named in a civil or criminal suit if the dog injured or killed someone. Even if you weren't convicted of the charges in court, you would still have to endure the potentially devastating cost of defending yourself in the likely event that your insurance company denies coverage for such an incident. Beyond that, the fact that you don't have a "no dog policy" doesn't mean you must accept them either. Your tenant was completely out of line and has demonstrated a significant lack of good judgment in this situation. In any case, the longer you wait to deal with this issue, the greater chance your tenant will put up a fight and if you've seen the dog and haven't said anything for several weeks the tenant may argue that you've given her what a judge would call "implied consent". In general, allowing tenants to have animals increases your selection of good tenants since many responsible and considerate renters own pets. However, if you allow a dog, remember that there's going to be feces and other typical dog issues such as hair, scratch marks, damaged landscaping and possibly, a barking problem. This is why is important to be selective about the pets you approve and collect an additional pet deposit. Be sure to meet the pet prior to approval and check with any previous landlords for references. Also, always use a Pet Agreement (such as the one included with The Complete Landlord e-Guide) stipulating strict policies with regard to all these potential issues and be clear about where you draw the line on pets. For example, I make it a strict policy not to allow puppies or kittens (animals under 2-years-old that still like to chew/scratch!). Now, getting back to your particular situation, I think you are wise with your policy to allow only a small dog. A pit bull however, is definitely not a "small" dog and it is known to be aggressive and potentially dangerous! As such, here are your options: 1) Deliver a lease violation notice to the tenant immediately explaining that the animal does not meet your requirements nor your previous verbal understanding. Give them sufficient time to get rid of the dog and if you have a dispute don't hesitate to contact an attorney and/or terminate the tenancy based on the breach of contract. 2) Allow the dog to remain as long as the tenants obtain their own liability insurance policy naming you as an additional insured and/or require them to pay for an additional rider to be added to your policy. I would recommend option #1 Jeanette. If you have further concerns on this issue, I would also advise you to contact an attorney to clarify what your rights are and possibly to draft a letter to your tenant. I wish you the best in your endeavor! Shannyn | WHAT'S HOT!
ServiceFirst Solutions Online Payment Processing for Landlords and Tenants A growing number of people are becoming comfortable with online electronic payment processing for all their bills and purchases. In fact, with the mileage programs and other credit card incentives, may even prefer this form of payment. For landlords, accepting credit cards and online check payments would eliminate the hassle of verifying check funds at move-in, increases timely rent payments and opens up a whole new avenue for collecting rent from cash poor tenants. In a high vacancy rental market, offering this option of payment may also provide a competitive edge. Although the landlording community has been gradually warming up to the benefits of electronic payments, current programs have been too technically challenging and cost prohibitive for anyone other than large property management firms and apartment complexes. This is why I was excited to find that someone had come up with an simplified version that had a lot of potential for us landlords and was willing to work with me toward creating an affordable option that could revolutionize rent collection for millions of small-time landlords. They are a national company whose interest is in working with rental owners across the country to help increase operating efficiencies in the area of rent collection. They normally work with larger apartment owners, however, because of a special arrangement with WayPoint Management Group, they have agreed to work with you and have offered to cut their one-time setup fee in HALF, for CompleteLandlord.com customers and newsletter subscribers. The company, ServiceFirst Solutions, understands that many of you will be trying this for the first time, and they will help you through the process step by step. ServiceFirst will provide you with everything you need to get setup and implement the program whether you have 10 or 10,000 residents. Plus, they will give you all the phone support you need to make your rent collection easier. For more information, call (818) 665-4804, and ask for Paul. Tell him you want to know more about how you can start collecting rents on time, every time! Plus, be sure to tell him that you were referred by CompleteLandlord.com so you get the special pricing. You may also click here to e-mail a request for additional information. I am quite intrigued with the potential of this opportunity and encourage you to take the time to research whether or not it will work for you! For more information, click here to see an article on the subject.
www.svcfirst.com | Thank you for reading our complimentary "opt-in only" publication. f there is a topic you would like to see covered, I welcome your comments and suggestions. Please send an e-mail to [email protected] and let us know how we're doing! Do you know someone else who would be interested in this information? Forward this message to a friend or associate or direct them to http://CompleteLandlord.com/newsletter_sign-up.htm . - To unsubscribe, Go to: www.CompleteLandlord.com/contactus.htm, enter your name and e-mail address and type "unsubscribe" in the comment box. Legal Disclaimer: This Newsletter includes comments and advice which is derived from the personal experiences and opinions of Shannyn Flory. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other professional assistance is required, the services of a competent professional should be sought.
(C) 2003 WayPoint Management Group, LLC http:\\www.CompleteLandlord.com |
CompleteLandlord.com &
WayPoint Management Group
present
The Landlord e-Guide Monthly Newsletter | | Home Contact Us About Us Affiliate Program Order Page Forms Packets | Issue #5
March 2004
Welcome to the Landlord e-Guide monthly newsletter. Our mission is to provide useful information on ways to maximize profits and minimize risks by helping you improve the way you do business as a landlord. Note: If you have not done so already, please take a quick moment to add our newsletter e-mail address: [email protected] to your ISP address book in order to ensure being able to receive and view this and future newsletters. WHAT'S NEW! As promised, there have been some exciting changes to our website in the last 45 days. I urge you to take the time to browse the Landlord's Resource Directory and several new pages at our site to see the following additions to our site: For those purchasers of the e-guide, there is a private version of the Landlord's Resource Directory (at the URL address listed on your download page - please Contact Us if you need access instructions). I spent the last month campaigning to attract attorneys who were willing to offer a free consultation and free state specific forms and have added them to the legal directory. So, be sure to check the listings in your state (the list is still growing) to schedule an appointment and establish this essential relationship. Also, all purchasers of Version 1.0 of The Complete Landlord e-Guide were e-mailed regarding their free download of Version 1.5. If you did not receive this notification and would like your free download, please Contact Us. Now to the billboard... Happy Landlording! Shannyn Tip of the Month: Keeping a Lid on Trouble: The True Value of a Real Estate Attorney Question of the month: Doomed to Learn the Hard Way What's HOT!: The Complete Landlord e-Guide and Landlord's Cash Flow Analyzer Combo Package
TIP OF THE MONTH
Keeping a Lid on Landlord Trouble - The True Value of a Real Estate Attorney Just as with any business, there are a few essential prerequisites to starting and running a legitimate property management company. One of your most important tasks is to establish a relationship with a competent real estate attorney - your first step toward minimizing your exposure for liability in an inherently risk laden business. The time and money you spend in this effort will be worth its weight in gold! After all, your lawyer will be the one to safeguard you from potential lawsuits, defend you if/when you are sued and assist you with the inevitable unlawful detainer (eviction) process. Finding the Right Attorney Choosing the right professional to represent you can be significant so take your time and be selective. The number of attorneys out there to choose from can be a bit overwhelming but there are a few tips that will help narrow the field: 1. Consider where you would like them to be located. If you are an absentee owner (live more than an hour or so driving distance away from your property), you will want to find someone in the general proximity of your rental property so they are familiar with local laws and can better handle the serving of notices if necessary. 2. Try and get a referral from someone you know in the rental real estate business. Search the web for landlord or real estate associations in your area and contact them. Members of these organizations are great sources of recommendations and some even have attorney members or sponsors. 3. Be sure to "interview" any prospects over the phone or in a free introductory consultation. Ask them questions about the eviction process, their fees and inquire about the most common landlord-tenant disputes and classic mistakes. These types of questions will help you gauge their level of experience and professionalism. Once you decide who you are comfortable with, be sure to clarify that you intend to retain their services as needed. Establishing an official "attorney-client" relationship is not only courteous, but it will give you a sense of empowerment knowing you have found a strong ally to help you fight your battles! Setting Policies and Procedures Creating and setting good policies and procedures will be an essential part of your job as a landlord. This entails making sure that you always reflect and respect federal, state and local laws. Your attorney can help you establish your policies and procedures or at the very least, review what you devise on your own and suggest any changes or additions. Clear policies and procedures will be the key to protecting yourself from many potential problems with tenants. They will also give you the confidence and security of having understood and established your rights and obligations in this regard. Leases and Forms Likewise, your rental agreement and supporting forms must adhere to the law. Remember, in most cases, judges are much less lenient with landlords than tenants when it comes to knowing and following due process of the law. As a landlord, you are expected to know your business! One of the classic landlord mistakes is using generic store bought leases and forms that lack the detail and verbiage that is meant to protect you. An attorney will be a vital resource in verifying the effectiveness of your lease and supporting forms, all of which will ultimately define your landlord-tenant relationships. He/she will also be able to clarify the minimum requirements and legal requirements on issues such as giving notice to terminate a lease, evicting a tenant, increasing the rent, etc. Many times, they will even supply you with the appropriate forms to use. Evictions and Legal Disputes The most common reasons for retaining an attorney are to handle evictions and other legal disputes with disgruntled tenants or resident applicants. It goes without saying however, that the likelihood of facing these situations diminishes significantly for those landlords who have been diligent in establishing the previously discussed steps. In the event that you do need legal assistance, your attorney will be your most valuable asset. In the face of a law suit, you will be able to relax in the knowing that you are being represented by a competent professional. Another benefit is that eventually, once you have established an understanding of the more basic procedures (such as the dos and don'ts of evictions), a good lawyer will prepare you to eventually handle them on your own if you choose to do so. Conclusion In summary, consider it one of your priorities as a landlord to reap the benefits of all that a good real estate attorney can offer before you get into a legal mess – not the other way around! So many landlords are intimidated by legal costs and the forced sense of reality an attorney may present them with. The truth is, a lawyer is as much a part of a good rental investment as a good real estate agent, accountant, maintenance person, or tenant. Don't find out the hard way the true value of a real estate attorney! | QUESTION OF THE MONTH Doomed to Learn the Hard Way! Question: Dear Shannyn, I rented a 2 room apartment to this couple 2 1/2 years ago. They were living with another lady who left them 6 months later. This couple couldn't afford the whole rent which is $500.00. I felt sorry for them and told them I would lower the to $400.00 until they got on their feet. They only had to pay for the gas bill. Well in the summer they leave 2 gas-forced air conditioners on full blast even while they're at work! Well now it's winter and the gas bill came to $40.00 which they thought was too much so they decided to buy an electric heater. Remember, I pay for the electricity! Recently the water pipes froze in their bathroom and burst causing severe damage throughout the building. Now I am going to have to pay for the remodel and need to raise the rent to help pay for the it. My question is can I ask them to leave or do I have the right to just raise the rent? Oh, by the way, they never signed a lease or paid a deposit. Please help me before I lose everything!! Jessica
Cicero, IL Answer: Dear Jessica,
Wow, what a story! As I'm sure you have learned by now, you have committed some of the biggest landlording no-nos. It will be necessary for you to handle tenant situations in a more strict and businesslike manner if you want to avoid these kinds of problems in the future. Unfortunately, your history of leniency on several issues has set the stage for a difficult and uncomfortable situation.
The good news is, if they caused the flood by letting the pipes freeze, you probably have grounds to (at the very least), terminate the tenancy based on their negligence. In my opinion, your apparent history with this tenant warrants that you move them out and start with a clean slate. It sounds like you have been losing money on this unit for some time now so a new lease will also help you by increasing your cash flow. What I recommend at this point is that you consult with a real estate attorney who will be able to tell you what your rights are based on the relevant landlord-tenant laws in your jurisdiction. You will likely be instructed to serve them with a lease violation notice (due to their neglect in maintaining minimal heat levels within the premises) and a lease termination notice giving them ample time as required by law to find alternative housing. You may also be able to sue them for your repair costs but that would be a separate claim altogether. Jessica, I also urge you take the time to put together a strict set of policies and procedures that you will follow with all future tenants. Have your attorney look them over and put together a thorough rental agreement for you as well. This will be some of the best time and money you will spend in your career as a landlord! I wish you the best in your endeavors! Sincerely,
Shannyn
WHAT'S HOT!
The Complete Landlord e-Guide & the Landlord's Cash Flow Analyzer
Combo Package I am thrilled to announce my recent alliance with Douglas Rutherford of LandlordSoftware.com, creator of the Landlord's Cash Flow Analyzer software for analyzing investment real estate purchases. I have promoted Mr. Rutherford's software as one of my personal favorite investment tools since the inception of my website. His many well written and affordably priced versions of analysis software are now being offered in combination with The Complete Landlord e-Guide Deluxe Package at discounted pricing. As you might imagine, these two products go hand in hand for new or seasoned investors who want to maximize their preparedness and profitability as a landlord. To find out more, click here or use the link on the CompleteLandlord.com website. If you haven't already purchased either of these great tools, now is a good time to do so! |
Thank you for reading our complimentary "opt-in only" publication. If there is a topic you would like to see covered, I welcome your comments and suggestions. Please send an e-mail to [email protected] and let us know how we're doing! Do you know someone else who would be interested in this information? Forward this message to a friend or associate or direct them to http://CompleteLandlord.com/newsletter_sign-up.htm . - To unsubscribe, Go to: www.CompleteLandlord.com/contactus.htm, enter your name and e-mail address and type "unsubscribe" in the comment box. (C) 2003 WayPoint Management Group, LLC http:\\www.CompleteLandlord.com Legal Disclaimer: This Newsletter includes comments and advice which is derived from the personal experiences and opinions of Shannyn Flory. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other professional assistance is required, the services of a competent professional should be sought. |
|
