August 31, 2014
With my very first stint as a property manager, I visited the municipal courts twice in the first 6 months (never in my life before)! One tenant cried foul over spotting a rat! Another called in emergency over overflowing kitchen sink! The heat does not work… my fridge is leaking…install child guards in windows… I am in financial/personal trouble and can’t pay rent…
The list is endless…
Becoming a landlord might sound too tempting, but trust me- it is not as glamorous as it seems. Also, it’s not nearly as ‘passive’ an income one might expect. Many landlords have spent many weekends in painting and cleaning properties in between tenants, discuss remodeling projects and repairs, stressing on late payments, feuding neighbors and secret pets. And if you get that ‘Professional Tenant from Hell’, he/she can leave you pulling your hair!
Real-estate market varies widely in different parts of the country. New Jersey’s laws are pro-tenant (favor tenant). Hence, it is important that Landlord knows what he/she is up against.
Some points to remember:
1) Do a tenant screening of potential renters
2) Do not slack on turnover:
Do you know the largest expense, outside mortgage, for a typical landlord is? Vacancy. A property that rents for $ 1200/month is costing you $ 40/day ++ utility charges and risk of holding on to a vacant property. When you get that ‘I am moving’ letter from your tenant, it is time to get to work and market the property.
3) Charge fees on late payment:
‘A family member is sick’, ‘My wife filed for separation’, ‘I was laid off’… are some excuses I have heard from the very same tenant. I’ve heard all the reasons in the world for why the rent is late. However, I still charge a late fee.. NOW
Heartless, I know. I did start off forgiving penalties because I have a soft-heart J But in doing so, I was making the tenants more irresponsible in paying rents on time. Of course, not all people are the same. When I was a tenant, I took the ‘regular payments of rent’ as my sole great responsibility! At the most, give them one chance with a warning of charging fees with the 2nd late payment- AND STICK TO IT!
Ps: One tenant has paid 4 consecutive penalties. Though we are earning more, such tenants tend to stop making payments all together! Time to make some decisions..
4) Raise rents:
You have a long term tenant. You do not want to risk losing him/her. So you maintain the same rent with which you started- 5 years ago! Unfortunately, inflation does not keep up with your rent control. If you do not raise rents in balance with inflation, you may actually be loosing money.
5) Hire a Property Manager:
If handling the ‘landlord stress’ is getting too much, hire a property manager. For a monthly fee, they will do all the heavy lifting for you- including finding tenants, hiring out repairs, and more.
Bad things do happen. When you are a landlord, “no news” is typically good news. There is a reason why so many people are hesitant to get into the game. As my attorney told me ‘bless your stars if you get good tenants’…
Do YOU have a horror story to share? I would like to hear from you.