Month: January 2016

Property Manager Interview – Duke Dodson


Spencer Sutton - Thursday, January 28, 2016

Retro stage microphone silhouette. Studio voice, karaoke and entertainment, old classic mic, musical equipment, vector illustration

Recently, Spencer and I sat down with Duke Dodson of Dodson Property Management in Richmond, Virginia to discuss a few issues property managers and landlords deal with on a day to day basis.

Duke’s property management company manages over 1,100 single-family rentals and 1,400 multi-family units.

Because it was so helpful to us, I’ve provided the whole transcript of our conversation. In our effort to be transparent, Duke does some things differently than how we manage here in Birmingham, Alabama.

We love to learn and I think it is healthy for all of us to get a different perspective.

Duke was kind enough to answer questions like . . .

  • What was your biggest mistake as a property manager when you got started?
  • What was the key to growing your business so big?
  • What are some of the benefits to using a large property manager over a “mom and pop shop”?
  • How do you use technology to make your business run more efficiently and provide a better product?
  • What are some unique ways to market a property?
  • What keeps a house from renting?
  • What are some things an investor should expect from a property manager?

I hope you enjoy and learn as much from this conversation as we did . . .

Matthew: Okay, let’s get started, the easiest question will be tell us how you got started in the business?

Duke: When I got started working after college, I worked a couple different jobs; one in the mortgage business and one in financial service. I also went to grad school and studied finance and real estate and started getting the itch to invest in real estate.

I read everything I could and bought four rental properties. My next step was to find a property manager to manage those properties. I couldn’t find one locally that I thought did it the way I wanted it done. I thought that it seemed like they were doing it in a very old-fashioned way, and customer service was nowhere in the mix.

So I decided to start my company. I always thought I wanted to start my own business, and it was kind of the start of the line at that time. I said, “Hey, this is a business that needs to be started,” and I think I would like it. I’ll be in and around real estate which is interesting to me.

So I opened the door, hung my shingle, and had just my four properties on day one. From there, just picked up one, then picked up two, and picked three and kind of grew from there.

Matthew: When you say customer service was kind of old-fashioned, what do you mean by that?

Duke: I felt all the systems were built around making it easy for the property manager or the broker, whomever. I thought property management was always a side job at sales brokerage.

The firm sold houses and they’ll just park their customers in the property management division, hire some idiot to run that division, and they didn’t really care how happy or unhappy their clients were. If they’re unhappy in property management, fine, go ahead and sell it.

That’s what they wanted to do in the first place. Just to give you an example, I Googled “Richmond Virginia Property Management” when I got started looking for a manager, and I went to the first 20 listings that popped up. Only about four of them were actually single-family property managers.

And of those four, only two called me back.

One was decent, to be honest with you. The other one was supposed to meet me for lunch and never showed up, and I never heard from him.

Property management in the Richmond market was just a very scattered and haphazard back then. Does that answer your question?

Matthew: Yes. Do you think it still is today?

Duke: I think a lot of folks are coming around and becoming more customer-centric, because there is way more competition. When I think on my time in the industry and how it’s change in the seven years I’ve been in it, I think, technology has improved drastically to automate a lot of the things we do, which makes our businesses way more scalable now than they ever were previously.

And, when the market crashed, a lot of rental properties flooded the market. People couldn’t sell a house, so they chose to rent and those two things happening at the same time, just increased the amount of property managers that entered the space.

Whenever there’s a lot more competition, people work harder for that business, so I think there is a much more, not completely customer-focused, but there’s lot more firms that think about it from a customer’s point of view versus just their point of view.

Matthew: Alright, so moving on to question two, what’s the biggest mistake you made when you get started?

Duke: This is not a commercial for NARPM, but probably not joining NARPM sooner. When I started off, I was trying find some mentors, people to chat with, and I couldn’t. There just weren’t any people in the industry back then that I wanted to pick their brain.

I would reach out to people, but I couldn’t find anybody that had really good information to do it — how to grow business, how to scale it. And so I was trying to do things on my own. I was taking wisdom from other industries, but I was recreating the wheel on the property management side of things.

I was creating my own inspection checklist, and my own renewal checklist. And that being said, it was a good exercise to go through. But I was taking weeks to do things, that I could have gotten from NARPM here in just an email, so I would say, I would have joined NARPM about two years earlier.

Matthew: Alright. What was the key that helped you take your business to the next level?

Duke: I think it’s probably two keys and that’s one of them… No, I’ll say three. So right around 2009, 2010, when I joined NARPM, I went to my first conference and after the conference, I came back and made three decisions.

  1. Number one was to get a good enterprise software solution, we use AppFolio, and just get some kind solution that stored all your data, automate things. That’s kind of no-brainer these days, but back then, not everybody was doing that.
  2. Number two was decide the structure of the business in a way that was going to be scalable. And so for us that meant, we decided to structure it as a portfolio manager model, I drew out our org chart and it helped me grow when we went to 5 employees, then 10 and 20, so structuring in a way that I could envision scaling it.
  3. And then finally, back then, we hired a business development person. Almost every property management company back then was considered a “mom and pop shop,” and a lot them still are. But for most people, the words “business development,” all that meant to them was when someone would call the management company, the owner of the company would drive up to the property, see it, sign them up. There was no structured marketing effort and outreach and there wasn’t full time salespeople or business development people. So back then, I didn’t know anyone that had an employee like this, so I tried to be one. I was out networking and doing business development maybe 10 hours per week and we were growing. But I figured I’m doing 10 hours a week, why don’t I get a person that’s better at it than me and he’s gonna do it 40 hours in a week, so we hired one. And basically, long story short, instead of growing 100 units a year, we grow 300 plus units a year for the next five years.

Matthew: What are the benefits to an Owner of using a bigger company like yours versus a smaller mom and pop shop?

Duke: There are pros and cons of both. There are some pros to having a little small mom and pop shop where you call and you get the owner on the phone. He or she drives up the property.

Honestly, these are real competent small property management that manage 40 properties. That’s not bad. The cons are when the small person decides to go out of town on vacation, the business shuts down. There’s nobody there. They’re relying on one person or a very small group of people to do things. The bigger companies, you can have in place that if my property managers go out of town, that property will still be managed without a hiccup.

That’s one aspect.

One other simple one, our website gets about 3000 to 5000 hits per week, a lot of those are from tenants looking at properties, so our website, gets our properties more exposure in our market.

I also think that a bigger company has more time to work on the business. I can work on the business more than working in the business, so I can constantly work to improve processes. We don’t do anything the way it’s always been done, or the way we always have done it.

Every process, we’re always constantly evolving and improving. If I was a really small company, I would never have time to improve the processes and create a better experience for our Owners and Tenant.

A small business couldn’t scale, take on 40 to 100 units really fast, whereas we can. Our client, our largest client, bought 1000 units in the last three years. We picked him up without a hiccup, because we have that size and scale, we can do that.

There’s probably more, but that’s just the ones that comes to mind first.

Spencer: That’s good information. I wanted to ask you, what’s been the biggest… You said you don’t do things the way a normal property management company would — innovation and things like that.

What’s probably the biggest game-changer for you in the way you manage your business or process that you thought out of the box and has improved, allowed you to scale or just improve efficiency in your business?

Duke: I’ll give you two examples. These aren’t huge, but I think this way of thinking is a game changer. Two examples:

1. The renewal process. Back when I started, every property manager in town didn’t have a renewal process. Their process was, “Don’t say anything to the tenant, hopefully, they won’t notice that their lease is gonna renew. And then once the lease renews, tell them them, ‘Hey, you’re stuck for another year, because you didn’t terminate the lease.'”

That was an unethical way to do it, it was a sloppy way, and you’re not maximizing rents. Maybe you could have increased the rent 3% to 5%. We had landlords asking us to do that.

Other property manager’s aren’t doing that. We just said, “No. That’s not ethical. It’s not good for the clients.” It’s definitely not good for the tenant, but it’s not good for the client either. It’s never good to trick someone into a whole year of living there. So we built a whole renewal process where it starts 120 days out before the lease ends.

Step one is doing market research and figuring out should we keep the rent the same, should we increase it, what are things renting for nearby?

With that information in hand, go to the owner, say, “Mr. Owner, we’d like to renew for another year. We think you should increase by $25 and here’s why.” Then you go into the tenant and negotiating, not just sending a letter, but having form of conversation, email conversation, whatever that tenant prefers, to renew for another year.

And if they’re not gonna renew, find out why. Maybe you can change something or fix something to keep them there. So we built a renewal checklist that’s got about 30, 40 steps on it. Back then, the conversation was just simply letting leases renew which is what’s on my mind.

2. We disburse money to clients four times a month. Historically, almost every property manager firm would disperse one day a month. For example, they disburse on the 10th through the 15th of that month.

So if that person disburses on the 15th and a tenant pays on the 16th, that client needs to wait 29 days to get their money. And when you put yourselves in clients’ shoes it’s crazy, like if you have mortgage to pay, you have bills to pay, you need that money.

Why is it sitting there? You explain to a client, you can’t have it for 29 days, it’s ludicrous. The reason property managers do that is because it saves time and money to disburse one time per month. It’s easier for the accounting team to do that process once per month, and then there’s four times.

And the first time I explained that at a local market meeting, my local peers looked at me like I had two heads. They said, “Why would you do that? It costs money.”

Personally, I pay more in banks fees to disburse four times, there’s a lot of inefficiencies in my accounting department because they do that four days a month, instead of just one day a month.

So I think those two are just two small little aspects in what we do, but it shows you a glimpse of, to me, what a client-centric focus is. It’s building every system around the client and providing the best experience you can to that client.

With that experience, with that positive client experience, it’s hard to qualify what that does for you, but something that makes your client happier, so they call and bother you less.

They stay as clients longer.

They refer you to other clients.

They tell the realtor that sent them there, “Hey, thanks for sending me the ‘so and so’ property management, they’ve done a real great job,” so that realtor is more likely to send you more people.

So it’s very hard to quantify. Every company these days is data-driven and assumes it’s great to track data, I think that’s important. I think people to forget a lot about the qualitative aspects of the business that it’s not just about what you know from the spreadsheet, and some of the best things you can’t measure.

Goodwill in the community, for example, is a very hard one to measure. But constantly providing good experience, your clients think well of you, your tenants think well of you, and they’re more likely to refer you, and more likely to not make your life like living hell, which you can be in this business, if you don’t treat people right.

Spencer: That was a great answer. I appreciate it. I’m going to scale that answer and say that I said it and I’ll put my picture on the newsletter. I’m just kidding. Who’s your ideal client, and why did they choose you over the competition?

Duke: I think if you look, I’ve got a value prop for three uniques, we try to make it simple and explain to people. It’s people, process, and technology.

Those are our three uniques. I think it’s actually more, I think we have like 30 uniques, but if we had to make it three, that’s the three. People, process, and technology.

I do like to explain to people that hey, this is a tough business, it’s a hard business, it takes a very resilient, positive person to do well in this business for a long period of time, so we recruit those people, and because of our culture we are able to attract those people that can deliver that experience to you.

The processes, again, our systems are all client-centric, so every system is built around the client. We put time and effort into every process. We don’t just remove property, we go through our removal process.

Our systems and processes are pretty good. Our technology, we’re embracing more and more technology every year, which automates things, improves a client’s experience, decreases leasing time, all of that. Those are the three unique.

Our ideal client, really it’s two types. One is they’re like a landlord that just has one property. We have a lot of those, and we think we do this pretty well.

And the second person, the investor that has multiple properties spread out. I think a lot of large firms can manage a 200-unit apartment complex where all 200 units are in one spot.

But when you take those 200 units and scatter them all over the city, it becomes a logistical challenge. And I think because of our systems and our people, our technology, we’re good at this scattered site situations and we’re good at the logistics that are involved in managing that.

Spencer: When you said technology and automation, that piqued my interest. What’s one of your biggest technology pieces that you’ve automated?

Duke: I think the nearest is Tenant Turner. That’s a local technology startup. And it’s in our building. They are into automating, syndicating the listings, automating the pre-screening of tenants and automating the scheduling, just frees up our people so they’re not always on the phone, typing emails, setting up appointments.

We use Happy Inspector for inspections, use AppFolio for pretty much everything else. We have pretty good SEO presence in our websites. Our website gets a lot of hits, which we put our energy into that. There obviously probably more things that we could do, we’re always look for ways to improve, but those are the main pieces of technology we use.

Matthew: Alright, last question, what are some unique ways to market a property?

Duke: I might not be the best person to answer this question. When I started, I always let clients drive that more than I should. I always say, “There’s a property near VCU,” for example, which is a college. They would say, “Hey, put some fliers up the VCU billboard for students,” and I would go do that. I would deliver fliers to businesses nearby.

Back then, Craigslist was becoming popular, internet was becoming popular for listing properties, but before that, it wasn’t so.

Since then, it almost makes no sense to do all these other aspects of marketing because 95% of the world is gonna find you on Craigslist, Zillow, HotPads, probably one of those sites.

It just makes more sense to take good pictures, provide a great description, and blast it out to those places. And then focus on being responsive and let people reach out to you. I’m not sure that we do a lot of other unique ways to market property other than that.

Spencer: Yes, I’m gonna spin the question then, what are some things that will keep a house from renting?

Duke: To keep a house from renting: bad pictures, bad angles, not well lit, not a quality camera and lens, I think that’s the big one. A description that doesn’t highlight… maybe you’ve heard the expression. “Don’t be a feature freak. Be a benefit buddy”, meaning, don’t blast people with features that they may or may not want, but explain the benefits of those features to them.

So instead of saying large family room, large deck. If you can say something like that you can say, “Can you imagine yourself entertaining family and friends here with this great set up?” I believe in explaining the benefits to folks versus listing a number of hip features. I also think not being responsive and professional when people reach out to you, and you got to answer the phone or get back to them quickly.

If you set up a showing, get there on time. Make it very easy for them to apply. It’s got to be simple and easy. And then once they all apply, follow up with them quickly, explain it to them quickly, and move on quickly.

Paperless applications and paperless leasing and all that stuff that we’re doing that these days, I think that’s pretty manageable these days to make that process as easy as possible for the potential tenant.

Spencer: If you don’t mind me asking one more question, because you mentioned that you deal with investors a good bit, it sounds like you can integrate them into your system pretty effortlessly. What do you see as the biggest mistake property managers make when dealing with investors?

Duke: Sure, I think small property managers don’t really understand the benefits of giving someone a discount when somebody or some group has 10 or 20 or 100 properties, I think that’s crazy. I think that any product in America, you get a volume discount for, and there’s a reason for it.

I’ve hear people will say, “Well, they have 10 houses, they want to reduce my pricing, but they won’t reduce the services.” But there are some efficiencies, only having one owner to report to who has 10 properties, versus 10 owners that each have one.

There’s efficiencies in signing up 10 properties. If I have one client with 10 properties, that’s only one property management group that I need to sign up. I don’t need to go to 10 different houses, meet 10 different people, follow to with 10 different people to get an agreement signed.

That is number one is understanding how to price it right. You got to price it so you’re still affordable, but not offering volume discount is pretty silly, in my opinion.

Secondly, I think investors are more likely to appreciate systems and on top of that they can’t pay retail for maintenance. Whereas the owner who has one house, you send a reputable HVAC vendor over there because he only gets one maintenance issue a year, so he doesn’t need a full time maintenance guy. But a guy that has 40 houses or 80 houses or 100 houses might need a partial or a full time maintenance person, because they can’t afford to pay retail rates for maintenance.

Finally, the third barrier is reporting. I think you got to be able to be organized, report the data properly to them, report in a way they want it. You may have to customize your reporting a little bit for them. You got to make their reporting easier, so they understand what’s going on.

Spencer: Awesome. Perfect! Duke, man, that was awesome! Thank you!

Duke: Sure, man, I hope that helped. I appreciate you guys doing that and let me blabber on for a little bit. That was fun.

Spencer: Hey, how many houses and how many apartments do you manage, like what is the makeup of your portfolio?

Duke: I think it’s about 1100 one to four-unit properties and 1400 apartments.

Spencer: Okay. Perfect.

Duke: It’s somewhere in that range.

Spencer: I just wanted to know. We wanted to know how to describe your business, so perfect.

Duke: Got you. Cool man, I appreciate it, Spencer, Phil, Matthew. I appreciate it.

Spencer: Thank you.

Duke: Have good day!

Spencer: You too.

What Happens When a Tenant Moves Out?


Matthew Whitaker - Wednesday, January 27, 2016

 

What happens when a tenant moves out of a gkhouses.com rental house?

Once notice has been given, we will send a property manager over to the house to complete a move out walk through.

This report will have images and descriptions of how the tenant left the house. The tenant is well aware of our move out guidelines and so we’re always glad to visit a home where the tenant has followed our process perfectly.

In this video I will walk you through a house that recently became vacant.

What To Do When Your Tenant Breaks Their Lease


Matthew Whitaker - Tuesday, January 26, 2016

 

man wearing a suit sitting in a table ripping up a contract

My Tenant is Breaking the Lease and they don’t seem to care about it.

You’ve done everything you can to make them happy.

Even completing work orders that didn’t need to be completed just to make them happy.

You just completed the second story on the doghouse for the “best friend” Cuddles AND NOW they have the nerve to submit a 30 day notice three months before their lease ends and is blaming YOU.

The worst part about it . . . they don’t even seem to care!

Whether this sounds familiar to you or you just recently rode by your house and found the opposite…no tenant, no family, just a vacant house…this article was written to help you navigate the muddy waters and decisions you must make.

Hopefully delivering you answers and at least knowing the right questions to ask.

You find out that once you’ve been a landlord for a while, anything can happen!

We are going to cover subjects like – when you can and can’t stop charging rent, how to charge out for repairs and abandonment.

* Please know this does not constitute legal advice and as always, consult someone who is competent in Landlord Tenant Law.

  Scenario #1: They actually submit notice, but it is early.

Businessman sitting in an office reacting in shock to the contents of a letter that he is reading raising his hand to his mouth

Let’s say your tenant submits notice to move and you can tell by the way they submit notice that they have no intention of paying past the move date.

If this is the case, do your best not to give the tenant a sermon on responsibility, promises and living up to the obligations they make.

Keep in mind the law is on your side and no matter what they say or think, they still owe you money for the time they promised to pay you in the lease.

The best thing to do is get the house back as quickly as possible. Once the tenant surrenders the keys to you or calls you and tells you he or she is out, then you may take possession of the property.

We actually ask them to physically turn in keys. The act of it makes surrendering possession more believable.

  Scenario #2: You just rode by the house and found it vacant.

The alternative or second story is that you just drove by the house, probably because you haven’t heard from your tenant in decades, to find that nobody is living there.

Empty house interior. Spacious family room with clean carpet floor and exit to walkout patio

The first thing you have to do is PROVE that nobody is living there.

When our managers find a house in this condition, they are taught to walk up to the house and knock on the door.

Typically, you can tell if there is no furniture is in the home. If there appears to be no furniture in the home, you may enter to see if there is furniture anywhere else in the home.

No furniture anywhere in the home, means nobody lives there and that is an easy one . . . you can take possession.

Typically, they aren’t that easy, because not only did they leave you owing money, they also left you a bunch of trash to dispose of.

The problem is you are certain it is crap, but not certain whether they want it or not or if they are coming back for it.

In this case, it is best to leave the house and leave an eviction notice (either for rent due or for material non-compliance) on the door you assume they enter by.

Give it 7 days, if the notice is gone, you can assume someone is living in the home and will need to take steps to evict. If the notice is still on the door, then you may take possession.

It is also very important to document this process the whole way via video or pictures.

In Alabama, you have no obligation to their stuff if they’ve abandoned it and you document they have. I know this varies from state to state. We usually donate it, take it to the dump or leave it at the street.

                   Now that you have your house back.

Let’s assume you’ve worked your way through one of the above two scenarios and now you have possession of the house while the tenant still has time on the lease.

Your first step is to do a walk through of the home and go ahead and itemize the things you are going to charge the tenant for their security deposit.

DON’T SEND THEM ANYTHING YET.

This is only the first time you will do this and you will do it again later. You will probably need to also have the utilities switched over. Don’t worry, they will have to pay you for these as well.

Since possession is surrendered, go ahead and have the work done to the house to get it ready to rent again.

You actually have an obligation to be working towards renting the home per Landlord Tenant law in Alabama. Work through your get ready/rehab process and market the home as you normally would.

Once the home is leased, there will be a point where the new tenant will begin paying rent.

This is an important day, because that is the last day you will charge the previous tenant for rent. That doesn’t mean they shouldn’t pay a penalty for leaving early in excess of the prorated rent, sit tight and we will get there shortly.

Before your new tenant moves in you will need to do another walk through, we call it a Move-in walk through to make sure the home is ready.

This is the time you will make certain you didn’t miss anything you should have charged the tenant on the first time through.

One question that often comes up is, “What happens if there is an issue, like theft or water damage, that comes as a result of the tenant NOT being in the home?”

Obviously, you should do everything you can to avoid this happening, but I believe that this is something you SHOULD add to your move out accounting and charge the tenant’s security deposit.

The day the new tenant picks up keys and begins paying rent, your clock begins ticking (you have 60 days in Alabama) to get the tenant’s security deposit accounting back to them.

Please don’t screw it up at this point!

You need to make sure you go through the natural flow of a regular tenant move out. Make sure you charge for all the costs you incurred because they moved early.

A few ideas are:

  • Rent (until the day before the new tenant moved in)
  • Late fees (for every month they haven’t paid you)
  • Utilities
  • Property damage
  • Termination fee (I’d suggest one month’s rent)

You should treat this like a normal move out and mail the information to the last known address, which is probably your rental home.

After we mail this letter, we typically give them two weeks to respond. If they don’t respond, you will need to make a decision whether to spend the money and pursue them through the court system or perhaps send them to collections.

We cover this topic in another blog article.

                            The bottom line.

Everyone’s situation is different and there are a lot of different issues that can pop up that would require you to change direction to another strategy.

So I’m going to reduce the whole thing to some points that should keep you out of trouble:

  1. When in doubt on whether a property is occupied, always default to assuming it is occupied. I’ve actually moved someone’s stuff out and they hadn’t moved out – they were still living there!
  2. When accounting for the security deposit, use reasonableness for all your charges and a judge will look fondly on you.
  3. Lastly, probably my most given advice, attempt to be as objective as possible when dealing with the tenant. They aren’t treating you fairly, but this is a business and you should treat the issue as a business person.

                          I hope this article was helpful

If you find yourself in this position and need a little help with your next step, give us a buzz.

We would love to help you get that person out so you can start getting rent from a good, long term paying tenant versus a tenant who is breaking the lease.

Where To Buy Rental Properties in Birmingham, AL (VIDEO part 5 of 5)


Spencer Sutton - Monday, January 25, 2016

 

Over the past couple of weeks we’ve walked through some of the best areas to buy rental houses in Birmingham.

Today we conclude this 5 Part Video Series with a look at Pleasant Grove and Hueytown. These are two of the less well-known rental areas but have some great opportunity for the patient and persistent investor.

Matthew interviews Bryan Miles, a long time investor (bought and sold over 400 houses) in the Birmingham market and someone understands these areas well.

Where to Buy Rental Houses in Birmingham AL (part 5 of 5)





Birmingham rental real estate is extremely diverse and offers a little bit of everything for investors. In this last video of our five part series on where to buy rental houses in Birmingham, AL, Matt…

Check out this video and if you would like other resources (either for the investor or accidental landlord), check out our ebooks and other videos designed to help anyone in any stage of the rental market.

Where To Buy Rental Properties In Birmingham, AL (VIDEO part 4 of 5)


Spencer Sutton - Wednesday, January 20, 2016

As a property manager in Birmingham, AL we help all kinds of owners in their search for the right rental house.

In this video Matthew and I are going to share about one of the most popular areas for local or out of state investors to buy rental property.

It’s a popular area for several reasons:

  1. You can buy houses wholesale for $2,000 to $20,000
  2. It’s a high Section 8 rental area
  3. The potential for a high return on investment is greater than other areas of Birmingham

While this is the case, we’ll walk you through the potential hazards with buying property in these areas as well.

The bottom line is that you need to DO YOUR HOMEWORK and factor in the possible risks when buying houses in low to moderate income areas.

It’s a lesson Matthew and I have learned all to well over the years…so there’s no reason for you to learn those lessons the hard way!

 

Where To Buy Rental Houses In Birmingham, AL (part 4 of 5)





We started our real estate career buying and selling houses in the easter part of town. Now that we’re a Birmingham Property Management company, we get to see where hundreds of other investors buy and…

Tenant Screening: The Benefit of a Disciplined Approach


Spencer Sutton - Tuesday, January 19, 2016

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Tenant Screening: The Benefits of a Disciplined Approach

Tenant screening is THE most important step in the process of occupying a rental property. We can’t emphasis this enough with owners.

A complete tenant screening ensures that each prospect is fully evaluated on their: credit history, residential history, criminal background and ability to pay.

Slack on any one of these four criteria and you could be in big trouble…trust us on this one!

At gkhouses.com we maintain a high level of discipline in our tenant screening process. We work hard to drive as much traffic and find the highest quality tenants in the shortest amount of time…and we believe you should too.

When you do this you won’t sacrifice tenant quality just to get someone in your home paying rent.

                         So, how do we do this?

Let us explain a little bit of our screening philosophy that we’ve fine tuned over the past 8 years.

                                                                    1. CREDIT SCORE

Through years of experience we have found a property price-point split that helps determine our underwriting criteria and believe that this is a very effective method. Our underwriting split is as follows:

Homes above $800/month in rent require an average tenant credit score of 580+.

Homes less than $800/month in rent require an average tenant credit score of 520+.

screen-shot-2016-01-19

This lesser credit requirement for approval on homes less than $800/month gives solid opportunities to those with a poor credit history to still have a great house. Because Birmingham is a diverse market we have homes throughout the city that can range from $400/month to $5,000/month for rent.

Having a tiered credit threshold allows us to offer great opportunities to a broad range of prospective tenants.

The detail of a credit report also presents the opportunity to the property manager to look back in the applicant’s past payment responsibility and evaluate what may be an alarming report compared to one that is truly misfortune (multiple unlawful detainers vs. medical bills).

Decline for credit score continues to be seen as the most common reason we can’t allow an applicant to rent one of our owner’s houses. It’s also the most efficient way to judge an applicant’s willingness and ability to pay future rent.

                                                              2. RESIDENTIAL RENT HISTORY

A residential rent history will also give you keen insight as to what kind of tenant the applicant may be in your home. After we receive a favorable credit score that meets or exceeds our criteria, we reach out to past landlords in order to hear about their experience with the applicant.

We believe the applicant’s current landlord is a good source of information that a credit score won’t give us necessarily. If a tenant has a borderline credit score and get’s rave reviews from their current landlord, we consider that into the decision to rent to them or not. The same applies…if they have borderline credit but their rent history is weak, we definitely take that into consideration.

The goal is to put the very best tenants into our owners houses…this landlord feedback is invaluable. If you’re a landlord and don’t have this as part of your current process, you should!

So what are we looking for?

  • History of late payments
  • NSF checks
  • Balance owed/damage responsibility
  • Lease responsibility
  • And our favorite question, “Would you rent to this tenant again?”

The bottom line is that if a current landlord reports a high number of late payments, balance owed, bounced checks, and/or damage done to the property then we will not take on that risk.

There are plenty of prospective tenants out there who have good credit, pay on time, and don’t damage property. Those are the tenants we’re looking for on a daily basis.

                                                           3. CRIMINAL BACKGROUND CHECK

You would be surprised how many property managers or landlords don’t make the extra effort to pull a criminal background check.

Law concept: magnifying optical glass with Criminal icon on digital background

It helps give us detail on an applicant’s past and is crucial in determining the risk thatan applicant may pose to those living in the house as well as their neighbors.

Safety (staff, neighbors and others living in the house) and liability (owner) are driving factors when determining if we should rent to an applicant. One of the best ways to determine this is through this background check.

We have a strict no felonies, no violent misdemeanors and no multiple misdemeanors policy when considering a criminal background.

In the case that we do see a felony charge over 10 years old, we will consider further underwriting if it is a non-violent felony charge.

To be committed and disciplined in your application process, we believe pulling a criminal background check is a must!

But it’s not something that is done with a push of a button here in Alabama. There is a significant investment of time to search criminal background databases and physical court records.

Imagine the scenario if we did not take this extra step and we rented a house to someone with a violent past. It’s not worth the risk and we believe our owners appreciate our diligence in our underwriting process.

                                                              4. ABILITY TO PAY

An applicant’s ability to pay rent is another important step in reaching full approval to rent…no surprise, right!?

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We believe that if an applicant does not have verifiable income equal to at least three (3) times a home’s rental rate, then he/she poses a higher than necessary risk to the owner.

There is a strong possibility that the tenant will end up not paying because not paying rent is easier than not buying groceries or paying utilities.

To have ‘verified’ rent we require that income be supported by the following:

  • Multiple pay stubs
  • Past 3 month’s bank statements
  • Previous year’s tax return
  • Confirmation with an employer (when applicable)

This time added to wait for an applicant to provide their income documents along with response time from an employer can sometimes become frustrating to both applicant and owner…but we maintain our disciplined approach and believe in the long run the owner will thank us for our focus.

We know that if an applicant loves the house they’ve applied for and is truly confident in their ability to verify their income, then they will find a way to persuade their employer to respond to an underwriters fax or call.

Income requirements can also be adjusted to mitigate additional risks discovered in underwriting.

In the case that an applicant has filed bankruptcy in the past (more than a year ago), we will consider approval if the verified income is four (4) times the monthly rent amount of the home applied for.

There you have our underwriting criteria for any gkhouses.com tenant. Feel free to use it for your own renal houses.

The benefits of a disciplined tenant screening process far outweighs the time and costs involved.

There is no better way to protect your investment and forecast a return than to stay disciplined and true to finding and placing the most qualified tenants for your house.

Safety Tips – Hot Water Heaters and Your Tenants


Spencer Sutton - Monday, January 18, 2016

I had the opportunity to be out in the field with Wayne McGinnis the other day and as we were talking through a rental house I noticed that he was examining the hot water heater.

I asked him to explain to me (while I filmed him) what he looks for when it comes to hot water heaters and why it’s so important.

Here’s the video and below you’ll find the transcript of our conversation.

Safety Precautions for Your Hot Water Heater





This video is about Safety Precautions for Your Hot Water Heater

Transcript:

Interviewer: Okay, I’m here with Wayne McGuiness. And I asked Wayne to tell me what he looks for when he looks at a hot water heater just to make sure that it’s safe for a tenant to move in a house. And so Wayne’s going to tell us all a little bit about hot water heaters, and the potential hazard or danger with them.

Wayne: All right. Today we’re looking at an electric hot water heater that has been installed properly. We’ve got a connection here at the junction box that can’t be pulled out.

We also have a connection here at the junction in the top of the water heater that cannot be pulled out, which is good, because a lot of times, maintenance guys would just run a regular wire down through here with no coax or anything. Which is fine, as long as it’s clamped on both ends. But a lot of times, you will see that they’ll run it through the hole in this plate, and it’ll just be loose.

Well, the problem there is that if a kid comes in or somebody else, and they jiggle that line and it pops loose, this whole water heater can split down the middle and be electrically charged.

So just imagine throwing a hairdryer in this much water. So we’ve got roughly 55 gallons of water to 60 gallons of water that would be charged with electricity. So if the child happened to be touching this and pulled that, that would be the end of it. There would be no recovery from that kind of electrical shock.

That would be almost be the equivalent of reaching up and grabbing a power line.

I know, particularly, of a maintenance man who was working on one that was smaller. And he touched the wire like that and pulled on it just a little bit, and it flashed, and the whole thing charged and split the water heater all the way down the middle, and blew him back.

And he could have been seriously hurt had he been touching the water heater at the same time. We also want to make sure that, especially on electric hot water heaters, we have these plates with screws in them.

A lot of times, guys will try to get away with just putting one and leaving the bottom one open. Well, inside each and every one of these compartments are live electrical wires. So if a child happens to be playing and he just swivels that out and sticks his hand in it, then, again, we’ve got live wires that they can grab hold of.

The third thing that we look for is a discharge line. This is a temperature and pressure release valve. What this is used for is that if this tank gets too hot and this water boils too hot, before this explodes, it will discharge water out through this line. Or if there’s too much water pressure on this hot water heater, this will pop. And when it pops, it will drain through here before it explodes, basically.

We’d like this to be run down six inches from the floor. The best practice is what this owner has done, which is perfect, and he has run it through the floor. Because, again, if it does pop off, which happens often, you don’t really want your whole floor covered in water. If you can get it outside of the unit or into the crawl space, that’s the best thing for you.

Where To Buy Rental Properties In Birmingham, AL (VIDEO part 3 of 5)


Spencer Sutton - Friday, January 15, 2016

Today we’re talking about southern Jefferson County and norther Shelby County as a tremendous rental opportunity for the right investor.

We’ll highlight which areas are popular, the kinds of houses you can buy, the tenant profile, and average rent in these areas.

Where To Buy Rental Houses In Birmingham, AL (part 3 of 5)





Matthew and Spencer discuss buying rental property in a growing area of Birmingham. This is an area that was developed later in Birmingham’s history and has grown substantially the past 20 years.

Should You Rent Your House? Here’s The Answer


Matthew Whitaker - Thursday, January 14, 2016

Student thinking with question marks on blackboard. Asian female young adult university or college student looking up at written drawings of question marks on chalkboard wondering career choices.

Should you rent your house?

The simple answer? It depends…

That may surprise you coming from a property management company.

But it shouldn’t.

We manage property for homeowners who probably wish they didn’t own a rental house for various reasons.

We also manage property for homeowners who consider it one of the best decisions they’ve made.

Our goal with this post is not to sway you one way or the other, but to give you some helpful guidance so that you can make the best decision for YOU!

Of course if you do decide to rent your house we would love to help you get your house ready, find the best tenant and have great success as a landlord.

But if you’re on the fence and trying to figure everything out, then keep reading.

People consider renting their houses for a variety of reasons.

  • They’re moving out of town for work and believe they’ll move back into their home after their assignment is finished
  • They have another house they want to buy but can’t sell the one they’re living in so renting is an alternative they’re considering
  • They see it as a possible long term investment strategy
  • They believe it can provide some additional income

If one of these describes your thought process or situation, then this article is for you and we have some insight that will help you make the best decision.

So, should you rent your house?

Let’s think through some items you need to consider:

1. Is your move permanent or temporary?

Let’s suppose you are moving out of town for work but plan on coming back after a certain period of time and think you might want to move back into your house. This scenario happens more often than you imagine.

If I were moving my family to a different city (say Nashville…just because we love that city and my wife and I both graduated from Lipscomb University), I would strongly consider renting my current home for a few reasons.

  • It’s the home where our kids grew up and would be perfect for us once we moved back to Birmingham
  • I believe real estate in Nashville may be overpriced and wouldn’t want to get stuck in a house I can’t sell if the market were to correct itself within 24 months
  • The commission I would pay to sell my house in Birmingham and then buy another one in 12 to 24 months might make it more expensive to sell than to rent it out.

The reasons could go on but I think you get the point.

So in this case…if you know you’re moving back into town, it makes perfect sense to rent your house for 12 to 24 months.

2. Do you need the profit on the sale of your house to put into a new house?

Suppose you have a house that you want to go ahead and buy but you can’t sell your house (we get this call quite often).

If you don’t need all the cash from the sale of your home then you might want to think about renting and taking an equity line of credit (HELOC) to fund the down payment on your new house. As long as your rent can cover your mortgage plus your equity line, it might make perfect sense. Over time you’ll be paying down that equity line with your tenant’s money!

So what are the alternatives?

If you feel like this is too risky of an option (you would not feel comfortable with a HELOC) you could continue to try and sell your house or decide not to move at all.

If you’re in a healthy market with a good sales of comparable houses but yours continues to sit, it possibly means you have either a pricing or a product problem.

  • Is your house outdated? Product problem.
  • Is your house up to date with the comparable houses that have sold in your area? Pricing problem.

In these cases it’s best to listen to the market and either decide to lower the price or improve the product. We have these same discussions with rental house owners who aren’t seeing a lot of traffic or applications come in for their house.

3. Can you rent your house for enough to cover your mortgage, taxes, and the occasional maintenance repair?

If you can rent your house for enough to cover the mortgage, taxes and the occasional repair, it could make a lot of sense. We’ve seen owners use the rental income to build into their retirement either through cash-flow or the equity the rental income builds paying down their mortgage.

You likely won’t have to pay taxes on the income with deductions from the mortgage and any repairs through the year. And if you believe your house will increase in value over the time it’s going to be for rent…then when you end up selling your house, you will realize that appreciation in a lump sum. Not a bad idea, huh?

4. Can you handle tenants?

This wouldn’t be the case if you used a good professional property manager. A solid property manager in Birmingham will act as your agent for the life of the agreement and handle all communication and any maintenance issues that arise…especially the ones that happen in the middle of the night!

But if you decide to go it alone then this is a valid question to ask yourself.

Here are some considerations for you to think about:

  1. Can I effectively screen out a potentially problem tenant and find the best one for my house?
  2. Do I have the time to answer the phone/email and show the house to anyone who’s interested and wants to take a look inside. As a Birmingham property management company we know that we average 15 showings to get five applications to find that ONE great tenant…do you have the patience and discipline to stay the course?
  3. Do I have the ability to hire and manage quality maintenance personnel to take care of any calls that come in which require attention?
  4. Do I have the right leases and documentation to make sure I follow the appropriate state laws when dealing with tenants?

This is a good start.

Looking back over the list I would say that you should DEFINITELY rent your home if you answered in the following way:

Is your move permanent or temporary? My move is temporary

Do you need the profit on the sale of your house to put into a new house? No

Can you rent your house for enough to cover your mortgage, taxes, and the occasional maintenance repair? Yes

Can you handle tenants? Yes

If this is the case you shouldn’t hesitate. Do it and you’ll be glad you did. And should you need any help with the ‘how to’ involved in the management process, check out our ebook on the subject.

You should strongly CONSIDER renting your home if you answered the questions the following way…but you need a strong Birmingham Property Manager to navigate through the process:

Is your move permanent or temporary? My move is probably permanent

Do you need the profit on the sale of your house to put into a new house? I need it but would consider a HELOC…or I don’t need it

Can you rent your house for enough to cover your mortgage, taxes, and the occasional maintenance repair? Yes, but it will be just enough

Can you handle tenants? I don’t know because I’ve never rented a house

I’m going to insist that you DON’T rent your home if you answered this way:

Is your move permanent or temporary? My move is permanent

Do you need the profit on the sale of your house to put into a new house? Yes, I need the profit…I can’t get a loan

Can you rent your house for enough to cover your mortgage, taxes, and the occasional maintenance repair? No

Can you handle tenants? I don’t like dealing with inconveniences in my life!

There you have it…walk through this list and if you have any questions (like how much should your house rent for) don’t hesitate to give us a call if we can help.

Should I Buy This Rental House? Episode 001


Matthew Whitaker - Wednesday, January 13, 2016

Should I Buy This Rental House?

This is a question we get a lot at gkhouses.

And that’s OK considering we manage over 1,100 houses and we started as investors ourselves.

Back in 2003 to 2004 we were asking the same questions. We were buying and selling houses wholesale and ended up keeping a handful of rentals during those early days.

To help give some insight and maybe some guidelines into what you should or shouldn’t buy we thought that a short video series might be beneficial for owners/investors.

You can catch these videos streaming live if you have the Periscope app….but if you want to catch them on our site, we’ll have edited out all of the live blunders!

We hope you enjoy and let us know if there are particular areas of town you’d like for us to spotlight.

Should I Buy This Rental House? Episode 001





We’re a professional property manager is Birmingham, AL where we manage over 1,100 houses around town. We have a lot of investors who buy rental houses in Birmingham and our ‘Should I Buy This Rental…

Where To Buy Rental Houses In Birmingham, AL (VIDEO part 2 of 5)


Spencer Sutton - Wednesday, January 13, 2016

Here is Matthew explaining why the Forestdale/Adamsville area is one of the best areas to buy rental property in Birmingham.

If you’re not following us on Periscope, go ahead and download the app. We’ll be filming live broadcasts that won’t necessarily all make it to our blog. Also, because it’s live there are some mistakes that might make you laugh…all at our expense.

Where to buy rental houses in Birmingham, AL (part 2 of 5)





This is part two of a five part series on best places to buy rental houses in Birmingham, AL. If you’re an investor interested in the Birmingham rental market, you’ll want to know more about these ar…

Where To Buy Rental Houses In Birmingham, AL (VIDEO part 1 of 5)


Spencer Sutton - Monday, January 11, 2016

So…where should you buy rental houses in Birmingham?

 

We receive calls from investors all the time asking about different areas of Birmingham. They’re trying to figure out exactly where they should buy rental houses for a long term strategy.

In this latest Periscope video, Matthew and I will talk about one area we believe should be on every investor’s list. It’s an area we have a lot of experience in (we manage around 250 properties here).

Before you watch this video just know that so much about where you buy depends on your goals and your risk tolerance. Usually, when there’s a greater potential for return on your investment, it will come with some extra risk.

In this video we won’t be discussing this aspect (goals/risk) of buying rental houses in Birmingham. Instead we’ll talk about what we believe to be the five best areas to buy and hold based on our own experience and the experience of our owners.

If you haven’t yet, download the Periscope app and follow us at gkhouses to see live broadcasts each week….each broadcast is only available for 24 hours so make sure you turn on the notifications.

Where to buy rental houses in Birmingham, AL (part 1 of 5)





In this short video we filmed on Periscope we’re going over where to buy rentals in Birmingham, Alabama. This is part 1 of a 5 part series we’ll be shooting on Periscope and then uploading to gkhouse…

Choose Your Property Manager Before You Choose Your House


Matthew Whitaker - Monday, January 11, 2016

happy fingers happy friends fingers and peace

So you’re interested in renting a home?

Finding the right home to rent can be a daunting task. School systems, bedrooms, bathrooms…the right combo is hard to find. When you find the perfect house, you want to jump on it and rent it before anyone else does.

Before you choose your home, we think it is important to consider WHO you are renting from.

All people who collect rent on a home aren’t the same. From single homeowners who are renting a home they can’t sell to large and small professional property managers; why would it make such a difference who you rent from?

Let me share with you 3 of the most important reasons it is in your best interest to rent from a professional property manager.

1. Security Deposit

What happens with your security deposit. When you lease a home from a professional manager, we are required to keep your security deposit in a separate account that is FDIC insured.

That means at ALL times we have your actual cash in a bank account that we reconcile once per month. People who self manage aren’t required to do this. That means they can spend your security deposit and you have to hope they have the cash when it is time for you to move out.

This would also be true if the homeowner gets foreclosed on.

In this scenario, if you are renting from the person that owns the home, you more than likely will lose your deposit. Your security deposit is safe with a professional manager regardless of foreclosure.

In addition to this, professional managers are usually more objective when assessing a property when someone moves out of a house. This would include when it comes time to determine if a house has normal wear and tear or if certain items should be charged to the tenant.

In our experience homeowners can be more subjective because the house may have special sentimental value…it may have been a house they’ve lived in for years or that their kids grew up in during the special years. As a tenant, you want a property manager who is completely objective.

2. Maintenance

With a professional manager, maintenance items are taken care of quickly. Professional managers have relationships with people who perform maintenance on homes. It is our business to do so. gkhouses.com actually owns the maintenance company!

When you call a professional manager with a maintenance need, you never catch them off guard and send them to the phone book to find a solution to your problem . . . we simply call the vendor we already have in place.

Because a self managed homeowner doesn’t call a plumber or a heating and air contractor on a daily basis, they also don’t have the leverage to be first on the list to be taken care of quickly. Professional managers who send these vendors a lot of business get taken care of first.

Also think about what happens if you have a maintenance emergency and the owner is on vacation? A professional manager should have a 24/7 emergency line where you will be taken care of no matter the vacation schedule.

3. Fair Housing Laws

Fair housing laws don’t apply to single owner properties. Yep, can you believe that? You could actually lose your application fee and be denied based on skin color, sex or something else!

Professional managers are bound by all federal fair housing laws and will underwrite your application based on how good a tenant you will be and not something that doesn’t matter. Want to be treated fairly for sure, choose a professional manager.

We highly suggest you choose a property manager before you choose your home.

Once you get in the home (or even to get in the home) you will be treated better. Professional managers aren’t perfect, but playing the law of averages you will have a more consistent experience.

Celebrate The Tenant (VIDEO)


Spencer Sutton - Friday, January 8, 2016

In this week’s Periscope broadcast, we discuss our 2016 initiative called ‘Celebrate the Tenant’ and the positive impact we expect to see with our tenants and our owners. Watch the video and share your thoughts!

Celebrate the Tenant





Well…we’ve taken to Periscope (an Android and Apple app) to share our insights, challenges, and lessons learned from managing 1,100 houses. Periscope allows us to shoot live video (completely unedi…

My Tenants Trashed My House, What Do I Do Next?


Matthew Whitaker - Thursday, January 7, 2016

Shocked Girl

My Tenants Trashed my House, what do I do Next?

“How do people live this way?” you think as you show up at your rental home to do a move out walk through; or worse, to let a worker into the home and the tenant is still living there!

There is little more disheartening than walking into a home that you’ve poured your time and money into only to find out that a tenant has completely disrespected you and your home and trashed the house.

So what’s the next step now that you’ve found it trashed? I’ll give you some ideas on what you can do when you find yourself stuck in this confusing and frustrating spot.

When to decide to get rid of the tenant

If the tenant is still in the home, you have a big decision to make and it goes like this . . . the tenant has already trashed the house . . . it is hard for them to trash it anymore . . . is it worth just letting them stay as long as they pay the rent and push the huge expense of turning the home off until they leave?

OR, the alternative decision is to get them the heck out and pursue someone who is going to take care of the home AND pay the rent on time.

I find it hard to give you advice on which one you should choose. Like any person giving good advice, the answer is really, “It depends.” Here are some questions I would ask myself . . .

  • Are they current on rent or do I have to spend a lot of my time collecting from them?
  • Is the house just not tidy (i.e. underwear on the ground), is it dirty (i.e. dishes left in the kitchen sink and roaches everywhere), or are they not taking care of the home period (grown up yard, disgusting mildew in the bath)?
  • What is your current cash flow situation?
  • How easy will it be to get them out if you decide to go that route?

In my opinion, if you can handle the cash flow, I would pursue getting them out if they are “dirty” and of course if they aren’t taking care of the home.

It has been our experience that this is usually a symptom of a bigger issue that manifests itself in more work orders and more collections. People who don’t have it together in their housekeeping skills, typically don’t have it together in a bunch of other areas of their life.

In this scenario, I highly suggest attempting to serve them a 30 day notice (provided the lease is over) or asking them if they would terminate the lease prior to the end. To do this second part, I would offer them some sort of benefit to leaving early . . . perhaps giving them one month rent free or telling them you won’t pursue them for the damages they have already accrued or even offering to pay their moving expenses.

Bottom line is you don’t want to have to spend the money to evict them.

Once the tenant is out

So at this point you’ve either gotten the tenant out or you just found your house in a less than desirable state. What do you do now?

adandoned messy and trashed house interior with graffifi on walls

1. Take a bunch of pictures. As if you didn’t know this already, taking pictures for the future pursuit of getting the tenant to pay you for all this mess is highly important. If you end up in front of a judge, pictures are a hard thing for the tenant to argue against. Also, have them timestamped so the tenant can’t say that happened AFTER they left. It may even be worth a video just to make sure you don’t miss anything.

2. Get estimates. Even if you do the work yourself, hammering each nail, it is wise to get some 3rd party estimates. You can charge out the security deposit and pursue damages based on a reasonable 3rd party estimate even if you do the work yourself.

3. Complete the work. The last thing you want to do is waste time on getting the work done. Getting the home cleaned up and back out on the market will limit the dollars you lose.

4. Make sure you send the tenant a full accounting of their security deposit (itemized) on time and in accordance with the Uniform Alabama Landlord Tenant Act. Currently, you must do this within 60 days from them moving out. The last thing you want to do is miss this deadline and have the tenant counter sue you and WIN!

5. If the tenant communicates with you, GREAT! Usually the ones who communicate are pretty upset. But, keep in mind, these are the payers, so take your time and walk through it with them step by step. It really isn’t fair if they are confused and just looking for clarification and you don’t spend the time with them to get them the clarity they need to feel comfortable with your accounting. We’ve even found that we were wrong on charging them certain items and after they cleared it up, we got a big fat check.

6. If the tenant doesn’t communicate, pursue collections immediately. I’ve heard a bunch of collection people say that time is the most important factor in getting money over not getting money. We give our tenants 14 days to respond and if we don’t hear from them, we either file suit against them or send them to collections.

7. When to file suit versus send to collections. This is a question we get often. Filing suit is simply filing a lawsuit in court, getting a judgement and then filing a wage garnishment. Collections for us is sending the tenant to a collection agent. We draw the line on where to send it based on the tenant’s income. If the tenant makes less than $30,000 per year, we suggest sending them to collections. There is a minimum amount of money the courts will allow a tenant to make before they will garnish their wages and that $30,000 mark for us tends to be a good breaking point.

Now let’s take a look at a couple of things you should NOT do:

1. Start educating the tenant on housekeeping skills. Truth is they don’t care and even if you change them for a time being, they will always be lazy and you will be educating them again in a few months. We had a manager attempt to do this on one of his houses and the tenant’s response was, “You live how you live and I’ll live how I’ll live.”

Angry man speaks on the phone

2. Get mad. As hard as it is, it does you no good to get mad at the tenants. In fact, it may make you do something that you will regret and completely screw up your future pursuits of them. It is hard to get a judge to feel sorry for you when you got mad and took the front door off of the hinges and threatened to beat them up in the alley.

Just like pursuing a tenant for money, if you are in landlording long enough, you will run into some tenants with pretty bad housekeeping skills.

It really makes you want to figure out a way to see their housekeeping skills prior to renting to them. We’ve actually tried to do this with no avail.

The best thing to do is to treat this like a business and make objective money-making decisions that are in your best interest in the long run.

Have you ever had a house trashed from a tenant? If so, what did you do about it?

The 5 Most Common Questions Owners Ask Us


Spencer Sutton - Tuesday, January 5, 2016

Choice and decisions: businessman thinking with question marks written on adhesive notes stuck to a brick wall

At gkhouses we have the pleasure of working with two types of owners:

  1. Homeowners who want to rent their personal house
  2. Investors who either have or are building a portfolio of rental houses

Birmingham is a unique market in that there are a lot of opportunities for investors interested in low, middle and high income houses. This coupled with a solid local economy are reasons investors from around the globe have targeted Birmingham as a solid investment opportunity.

As you might imagine, no matter if you’re a homeowner looking to rent your house or an investor familiar with purchasing and renting property, there are common questions we hear owners asking when looking for a professional property manager….you might call them FAQ’s.

nick_blog_shot_2

At gkhouses we have someone who is responsible for all of our new owner calls or web inquiries…his name is Nick Goudreau. I asked Nick to talk about the five most common questions owners ask when we speak with them on the phone. So, here we go!

 

 

 

 

    1. How much do you think I can charge for rent?

With mortgages, insurance premiums, and taxes in mind, the biggest worry for a homeowner who has never rented a house before is how much they will get for rent. Some owners believe all they need to do is add up expenses plus tack a little extra for profit and…presto…there’s your asking rent.

As Lee Corso says on Football Saturdays – Not So Fast, My Friend!

It’s extremely important find your true market rate in order to minimize any losses while marketing your home for a tenant.

So how do we find that market rent?

As previously stated in a more detailed blog post on market rent, there are three great ways to help find a market rent value for your home.

  1. First, we’d suggest taking a look at either Zillow.com or Trulia.com. Both sites can provide an excellent starting point and will also be referenced by tenants when looking for a home to rent. However, from our experience, some of the rental rates these sites give you can be a little bit inflated.
  2. Secondly, search local property manager sites for comparable homes in the area.
  3. Lastly, check your neighborhood for other homes for rent and inquire about their rental rate.

Each of these options should provide your with a good idea of a fair market value and a price point that will help you find a good tenant quickly.

What we’ve come to find out is that if you market your home and you’re not receiving a fair amount of calls or applications, there is either a price or a product issue.

Your house could be overpriced and no calls or applications is the market’s way of telling you you’re not in the ballpark with your price.

Or if you’re getting some interested parties come look at your house but not a lot of applications, it’s possibly a problem with your house (the product).

    2. What happens if the tenant tears up my house?

Even when a homeowner is moving out and deciding to rent their home, they may have raised kids in their home or had other great memories from their time living there. The last thing they want is for a tenant to cause damage to their home. So, what happens if they do?

Of course, the first line of defense is the security deposit. When a tenant signs a lease with gkhouses, we collect a security deposit up front equal to one month’s rent and hold it in an escrow account until the tenant’s lease is up or terminated.

Upon tenant move-out, a property manager will visit the home and perform a move-out inspection. During this inspection, he is looking for any damages caused throughout the tenants stay and deeming what are tenant related damages (which would be paid to repair out of the security deposit we still hold) and what is considered general wear and tear (which the owner can decide if work needs to be done before another tenant moves in).

Once he’s finished this report, it’s then handed off to our maintenance team to give an estimate on the repairs. Any tenant related damage is then deducted from the security deposit and passed onto the owner to pay for the repairs. Sometimes, the damages to the home are more costly than the initial security deposit.

In this case, gkhouses will charge the tenant for any additional damage upon move out and if left unpaid will ultimately be passed off to a collections agency.

Here’s a copy of a recent move-out inspection so you can see what one of our owner’s receives when a tenant moves out.

    3. Can I have a say in who rents my home?

The short answer is no.

It’s left up to the owner to decide whether or not to allow pets in the home, but Fair Housing Laws do not allow owners or property managers to take any of the following actions based on race, color, national origin, religion, sex, familial status or handicap:

  • Refuse to rent or sell housing
  • Refuse to negotiate for housing
  • Make housing unavailable
  • Deny a dwelling
  • Set different terms, conditions or privileges for sale or rental of a dwelling
  • Provide different housing services or facilities
  • Falsely deny that housing is available for inspection, sale, or rental
  • For profit, persuade owners to sell or rent (blockbusting) or
  • Deny anyone access to or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing.

One of the most common request from a homeowner is that we only rent their home to a family.

Of course this is something we cannot do, not only can we not discriminate against people based their familial status, but we cannot ask whether they are married or have children!

Fair housing laws are a serious issue and we have a zero tolerance policy here at gkhouses. If you should accidentally break one of these laws, you could land yourself in a messy lawsuit.

For your safety, either strictly adhere to these regulations or let a professional property manager handle finding a tenant and the tenant screening process for your home.

    4. How do you make sure you collect rent?

Collecting rent can sometimes be one of the tough parts of managing properties. With that being said, gkhouses has around a 98% collections rate on tenants we place in homes (as of 12/31/15). Our successful collections rate is very dependent on our thorough tenant screening process and our disciplined collections process.

When we first started in business with our own rental properties, collecting rent was not a fun task…especially if the tenant was behind. And that’s typically the only time when a tenant heard from us…when they owed us money.

And the only time we usually heard from a tenant was when they had a maintenance problem.

This created a tension where neither one of us really wanted to talk to the other….and in this business, that’s not good!

In order to defuse this tension we started sending tenants monthly invoices like we all get for bills that are coming due. This helped tremendously.

We also began maintaining an open dialogue with each tenant about the rent they owed when it became past due. This includes emails and phone calls.

We understand that life happens sometimes and a tenant may either be late or miss a month of rent, but we expect them to communicate these issues with us and begin discussing a payment plan with us.

If tenants ever stop communicating with us or cooperating, our collections process heats up. Here’s our collections process in a simple infographic so you can understand how it works.

As you can see, we give tenants multiple opportunities to work out a payment plan with us before moving them to the next “bucket” and ultimately posting eviction.

    5. How does maintenance work?

Portrait of male plumber fixing a sink in bathroom

Maintenance is always one of a homeowner’s biggest worries.

While living in the home, it’s easy for the homeowner to notice what needs to be fixed and either fix it yourself or hire someone to do it…or like a lot of homeowners do, just put it off!

It’s different when dealing with a tenant. When they notice something that needs to be repaired, they won’t hesitate to call that request into the office. And that’s ok…we want tenants to have a safe, secure, and well cared for home.

We rely on these tenants along with our quarterly inspections to let us know when the house needs repairs.

The process works like this:

  • Tenant notices something is wrong in the house (let’s say there’s a leak under one of the sinks)
  • The tenant will either call us or fill out an online form to inform us of the problem.
  • One of our technicians will go out and assess the situation.
  • If it’s a repair that can be made for less than $300, they will take care of it on the spot
  • If it’s a repair that will exceed $300, they will let our Operations department know and deliver an estimate to the homeowner
  • The homeowner can either choose to have gkhouses make the necessary repairs or they can find a contractor on their own.

Either way, the important thing to remember is that the tenant has identified this as an issue and the sooner it’s taken care of, the better this ongoing relationship will be!

Our maintenance team is made up of skilled professionals like plumbers, electricians, HVAC technicians, and general handymen. A majority of our owners enjoy the peace of mind knowing our licensed and insured technicians are working on their home…and not what we call ‘Chuck in a truck”.

Here at gkhouses, we require that our owners carry a maintenance reserve fund of $100 per property or $500 per entity/owner, whichever is greater. This fund is used for any small maintenance repairs that come up during the year while the tenant is in the home.

Ultimately, our goal is to provide quality and attentive service to our owners and tenants in a quick and responsive manner. If our tenants and owners are happy, we’re happy.

If you’re a homeowner and have questions outside of these five, feel free to reach out to Nick at [email protected] and he’ll be happy to answer them for you! As a matter of fact, he’s the one that wrote most of this post today!

And don’t forget that you can always check list of FAQ’s.