Month: March 2016

How To Evict The Guest That Doesn’t Belong In Your Rental


Matthew Whitaker - Wednesday, March 30, 2016

Full length portrait of handsome businessman kicking over gray background

Have you ever needed to evict the guest that doesn’t belong?

There is nothing better than a tenant who pays rent on time and takes care of your home. Sometimes, you move that person in (or who you expect to be that person) and someone moves in with them . . . how do you get that guest who is not on the lease out of your house?
About two years into our management business we received a call from an irate homeowner. According to her, we moved a “convicted sex offender” into the house next door.

Obviously, this made my heart sink and after listening to the homeowner’s valid concerns, I promised to look into it and asked her to forward me the notice she had received. Once off the phone I raced to the filing cabinet (remember those?) where we kept the applications and found the application for the new move in. It appeared, from the application at least, that the tenant was NOT a sex offender. We’d checked.

This caused me to do some investigative work. The neighbor mentioned that it was a male who was the sex offender and the only occupant according to our records was a female. Next move, pick up the phone and call the tenant to find out what was going on.

The tenant answered the phone, thankfully. I quizzed her about what I had just heard and was about to receive proof of. She denied knowing what I was talking about.

However, after awhile of speaking with her, she finally relented and admitted that it was her boyfriend and they couldn’t find a place because no one would take him. She then attempted to explain the story of “how it happened” when I stopped her.

Bottom line she had lied on the application and that was grounds for eviction. In Alabama Landlord Tenant Law, this couldn’t even be cured . . . meaning there was no way for her to make it right and stay unless I allowed it . . . which I didn’t.

Getting an unwanted person who is not on the lease out can be a little tricky.

Let’s look at a few things you should consider prior to diving into how to get them out.

1. What does your lease say about it? Most leases have a provision in them that states that guests who stay longer than a certain period of time will be required to be added to the lease. Typically I’ve seen this in the 7 – 14 day time period.

2. You will need to prove they are actually staying there. Which, can be harder than expected. If they are receiving mail there, then they are living there . . . but you can’t check their mail without committing a crime. What are some ways to prove they live there?

  • Date stamped pictures of their car there overnight for a contiguous time that exceeds what your lease says.
  • Proof from maintenance tech’s that the person is always at the house when they come over for work orders.
  • If there is only one adult on the lease and the person living there with them is of the opposite sex, you can take pictures of the person’s clothing, deodorant, etc. that identifies them as living there and could not reasonably be the other person’s stuff.

3. You need to decide whether the person living there not on the lease is really a problem. This, in most circumstances, becomes a business decision. You will need to decide if you are really willing to go through the trouble to have them out and risk losing an otherwise good tenant.

For the rest of this article, we will assume that you decided that you can prove they are living there and are in violation of your lease by living there.

The first step is to put them on notice that they are in violation of the lease by posting a 7 day notice on the door for a “material non-compliance” breach of the lease. If you need more information on this, please see our “How to evict” blog posts where we go through them in detail.

My guess is that all things being equal, the tenant is going to make a phone call and swear their Aunt Mable is only in town for a short time and this is where you should share with them the evidence of her being there for much longer than that.

It has been our experience that most tenants will acknowledge, at least internally, that they need to get Auntie out and will do it and prove to you it is done. Proving can get a little tricky. Also, proving they haven’t moved for you will get tricky. But, let’s pretend you are able to do it.

After the 7 day notice expires, you will have to evict the Tenant. That’s right, you will be forced to evict your tenant for non-compliance of the lease. There is no way to get a guest of your tenant out of the house for trespassing . . . unless, of course, the tenant agrees the person is trespassing. If you need help with the eviction process, please click here.

Conclusion

Getting someone out of your rental home who doesn’t belong is such a sticky and challenging situation. You will need to make sure you have plenty of evidence, especially if the tenant is willing to take the matter all the way to a judge.

If you are willing to spend the time and effort, evicting a guest that doesn’t belong in your home, can really be a boost for the neighborhood and potentially your bottom line.

What Does My Landlord Deposit Return Letter Need To Say?


Matthew Whitaker - Wednesday, March 23, 2016

Concentrated young brunet female is sitting on couch and attentively reading letter in loft apartment

What Does My Landlord Deposit Return Letter Need To Say?

There is a lot of stress around the move out process with a tenant – particularly around the landlord deposit return letter. So, what does it need to say and when does it need to be sent?

Before we get started, let me ask you a questions.

Do you have any idea what can happen if the letter says the wrong thing and isn’t sent on time?

You can actually be fined!

That’s right, if the letter is incorrect or money not returned on time, you can actually end up paying money. Sometimes it is as much as three times the original deposit. This is regardless of whether they would have gotten the deposit back.

Said another way, the tenant can destroy the house and if you screw this step up, you can end up owing them money!

Let that sink in…doesn’t make sense, does it?

Let’s take a look at the appropriate time and what it needs to say . . .

1. In Alabama, the letter and security deposit (if any) must be mailed to the tenant within 60 days of the tenant surrendering the property. This is MUCH more than other states. Typically state Landlord Tenant law requires 30 days. Not in Alabama, they just recently changed this from 35 days.

2. It must be mailed to the last known address or the forwarding address (if it was provided). Typically when a tenant submits notice, they will know where you should forward the move out accounting and security deposit. If it isn’t on the notice, they will usually provide it to you when they turn in keys. However, if they don’t (and sometimes they won’t), you will be required to send it to the last known address . . . which is typically the property.

3. The letter must include a complete accounting of the tenant’s security deposit, if you aren’t returning a portion of it. Meaning if you have kept any of the deposit for damages to the property or unpaid rent, then you need to show what you spent (or plan on spending) to cover the damages or rent. We will typically itemize the charges and then show the application of the security deposit to those outstanding charges.

4. Can you charge for something you are not going to fix? This is a question I get a lot and the answer is yes. If the tenant put a scratch on your hardwood floor, you aren’t’ required to actually have it fixed to charge the tenant for the damage. You need to make sure that what you charge the tenant is reasonable to fix the problem, but it can certainly be charged.

5. The letter can be and should be simple. Don’t try to over do the letter. Simply keep it basic and focus on clearly communicating what happened to the tenant’s security deposit.

6. You don’t need to include a letter if you are sending them the whole deposit. What’s the point?

For your help, I’ve included a copy of our move out letter. You are welcome to use our format and use it as a tools when making your own.

Good luck with your tenant’s move out process and good luck sending them the landlord deposit return letter.

Here’s a copy of a letter we might send to a tenant:

Tenant Name 123 Main Street Anytown, TN 37000

Re: Security Deposit Statement

Dear {Tenant Name}:

Enclosed please find an itemized list of charges. Based on these charges, you have a balance due of $347.98.

Credits: Security Deposit $750.00

Total Credits $750.00

Charges: Trash and Debris Removal $500.00 Replace Torn Carpet Strips – Living Room $88.50 Replace Missing Grease Pans on Stove $59.00 Replace Globe on Fixture – Bedroom 3 $15.00 Outstanding Amount $435.48

Total Charges $1,097.98

Amount Due $347.98

Please remit the balance due immediately. If you have any questions or concerns regarding the charges or balance due, please contact us at [email protected]

Regards,

What You Need To Know About Repairs And Maintenance


Matthew Whitaker - Monday, March 21, 2016

Plumber man with tools in the kitchen. Plumbing and renovation.

What you need to know about repair and maintenance

Repair and maintenance.

This is probably one of the most overlooked expenses when I speak with an investor about a rental portfolio they want to buy.

And no matter what shape your property is in when you rent it, there will be the eventual maintenance call that you will need to address.

We’ve met with investors who pull out their spreadsheets boasting 15% CAP rate projections with absolutely no (or very little) allowance for maintenance and repair. We politely explain that these projections are simply not realistic. Our hope is that they listen and begin to think through the ramifications of basing investment returns on wishful thinking and not on years of experience.

After buying, selling and renting well over a thousand houses since 2003, we understand a thing or two about maintenance and repair. As a matter of fact we started a maintenance company so that we could manage our own work and make sure the quality was up to gkhouses.com standards.

Based on our experience, we believe most homeowners underestimate maintenance and repairs. The general rule is approximately 1% of the home value per year. So if your rental house is valued at $200,000, you should expect around $2,000 a year in repairs and maintenance.

But in the Birmingham investment market, that’s simply not the case. Most of the time you will be buying older homes that require more maintenance than a newer home in a growing part of the city.

But this article isn’t about how much you should budget, but it’s about making sure you choose the right person/company to help you complete those maintenance calls and repair requests.

Your Contractor…Your Partner

architecture and home renovation concept - builder with blueprint shaking partner hand

It’s important to think of your contractor – or your maintenance and repair person/people – like a partner.

They’ll be a great person to bounce ideas off of and can help you keep your tenant safe and happy….and hopefully in your home for 20 years!

If your house isn’t ‘rent ready’ then you’ll need to a contractor to help you get it up to par. If it’s already ‘rent ready’ then you’ll need someone to make sure your tenant’s taken care of when they do call.

It’s one of the most important partnerships you’ll make.

Nothing can slow you down (or get you in trouble) more than a bad contractor. Faulty work, slow work, or no work have the potential to bring your rehab or maintenance work to a screeching halt. It also makes you look unprofessional in the eyes of your tenant or prospective tenant.

It’s tempting to find and use a contractor whose prices are the cheapest. And we understand the need to handle your investment dollars wisely…but be careful; you often get what you pay for.

That isn’t to say that low-priced contractors always do a poor job; we’ve met some solid contractors who were at the lower end of the cost spectrum. Still, you need to be careful. Poorly done work can come back and cost you double to fix. We have plenty of stories about that if you want to hear them.

So what do you look for?

It’s extremely important to know if the contractor you partner with is licensed and insured. Why is this so vital? There are several reasons you shouldn’t let someone who is not licensed and insured work on your property:

1. They can get hurt on the job and sue you – What happens if an uninsured contractor falls off your roof and injures him or herself? They can sue and possibly take you to the cleaners. What would that do to your future returns on that property?

2. They can install your equipment incorrectly – If you’re dealing with someone who is not licensed or insured then most likely you are dealing with someone who is not the best at their craft.

Here’s an example from my past – it was around 2007 and I was trying to get HVAC installed on one of my rentals for cheap. I found a guy I really liked and he installed a unit that saved me at least a thousand dollars. It wasn’t until later that summer when my tenant got their enormous power bill ($900) that I realized he had wired the unit wrong. I had to install a new system to replace that one. It came out of my pocket because this part-time HVAC ‘specialist’ didn’t have a warranty. Lesson learned.

3. They can do your work and then disappear overnight – These types of scammy contractors typically aren’t in business long. This will cause problems if you need warranty work down the road and you can’t find them. Or, if they take their initial draw and never show up again. Back in the early days, we learned that the hard way.

Keep in mind that finding a good contractor is a necessity no matter what type of property you purchase. Even if you buy a new house, you’ll eventually have repairs to be made. It’s best to start developing a relationship early so your work will be carried out faithfully and on time when it’s time for a project.

We actually have a maintenance department here at gkhouses.com and our Director of Maintenance monitors everyone’s work and makes sure all of our employees have the proper insurance and designations for their craft.

So how do you know if the person you’re considering in Birmingham is licensed and insured?

Here are some helpful tips:

  • Ask the contractor you’re considering to show you their card proving they are state certified. These cards typically have a hologram on them that cannot easily be fraudulently reproduced.
  • For Liability Insurance and Workman’s Comp it’s best to have the insurance provider fax or email you the full Acord Form directly. This will eliminate the opportunity for an uninsured contractor to provide you with fraudulent documents.

In conclusion

There are plenty of warning signs that you may be dealing with a less than reputable contractor. In the beginning of our real estate career we used these fly-by-night contractors because they were cheap and we thought they were saving us money.

In the short term, maybe…but over time we ended up spending more money repairing their repairs and we lost several good tenants because of shoddy work. The extra repair work and the additional months our houses were vacant put us behind on our investment goals.

Learn from our early mistakes and find a contractor you can trust to be your long term partner. Doing this on the front end will give you a massive advantage in achieving rental house success!

My Tenant Is Harassing Me


Matthew Whitaker - Friday, March 18, 2016

Angry woman shouting and fearful man

My Tenant is harassing me!

It’s one thing to have an annoying tenant…and it’s something completely different to have a tenant who is harassing you.

It is probably the worst situation to be in, short of your tenant being late on rent or trashing your property. And unfortunately, it’s not discussed half as much as landlord harassment of a tenant.

Different people have different reactions to this type of harassment. What makes it especially difficult is the fact that this tenant is living in YOUR house and owes YOU money each month.

So…what do you do when your tenant begins harassing you and won’t stop?

I’ve rented thousands of homes, so you can imagine I’ve had my fair share of tenants who harassed me . . . some had legitimate reasons, but some had very little reason to harass.

I’ve been harassed to clean a tenant’s front porch from all the pollen on it . . . harassed and had a Better Business Bureau claim filed against us because a tenant paid rent TWICE and blamed us for taking it . . . harassed because the “heat wasn’t working” and their kids were freezing in December and when I showed up at the house, they were all wearing shorts and “wife-beater” t-shirts and mad the heat wouldn’t get it to 80 degrees.

If you are going to be in this business for any time, you will have some funny stories (along with some depressing ones!), which at the time will require mounds of patience.

Let’s take a quick look at steps you should take if your tenant is harassing you . . .

1. Is the claim legitimate? Sometimes it is hard to disconnect yourself from the emotion that a tenant is bringing when making claims against you as a landlord.

Sometimes, we take it personally and immediately want to defend ourselves or justify our actions. But, much like any business decision, some of the best business people are able to disconnect themselves from the emotion and handle the situation. That is an important and valuable skill for any landlord.

If their air conditioning is out on July 4th, they may be mad about it. It is not worth playing “tit for tat” with the tenant. Whether they are made about it or not, you need to get it fixed. Try not to be a landlord that wants to prove your point or “show them” and ignore the issue because of the way they’ve treated you.

If it is a situation where you are in the wrong or you should fix something, do it despite the way they act towards you. The best customer service companies in the world do the same…and as a landlord, you’re in the customer service business.

2. Are they calling you about appropriate things at inappropriate times? This is a frequent thing tenant’s will do. They expect you to be like a vacation home rental company and answer at all hours of the night.

We have a 24/7 answering service that handles these types of calls, but you may not have that luxury. The first step will be to have a candid conversation about the tenant’s expectations. Sometimes a proverbial “line in the sand” will be enough to make the tenant aware of his or her unreasonable expectations.

If that conversation doesn’t work, simply don’t reward them by answering the phone or responding to emails at that time.

They will get the hint and won’t expect responses from you until the appropriate hours that you shared with them during your conversation. However, if you start by answering their calls/emails/texts at inappropriate times, you will have likely started a practice that will take much longer to stop than had you discussed your policy during the leasing process.

3. Are they calling you about inappropriate things at inappropriate times? One of the biggest lessons I’ve learned about this business is that you can’t please everyone.

If you are like me and like for things to work perfectly every time, it will bother you when you can’t please someone. If this is the case and you can’t make them happy, you can either live with the misery, ask them if they would like to “mutually terminate” the lease and go your separate ways, or hire a property manager to insulate you from the tenant.

A good property manager has had the tough conversations you may be avoiding. And the important thing to remember is that certain tenants understand how far they can push an individual landlord…it’s likely much further than the professional property management company can be pushed!

A tenant harassing you can be a very frustrating thing. They will always be on your mind and you feel like you can never get away from them. Hopefully this article will help you deal with a tenant who is harassing you or prepare you to deal with difficult situations should you find yourself renting to a difficult tenant in the future.

5 Questions Every Landlord Needs To Ask About Their Rental Property


Matthew Whitaker - Wednesday, March 16, 2016

There are 5 questions every landlord needs to ask about their rental property.

Asking these five questions can save you thousands of dollars and whole lotta’ heartache!

In this video, Matthew Whitaker walks you step by step through these questions that will help you make better decisions about the rental houses you buy.

A full transcript is below this video.

5 Questions Every New Landlord Needs To Ask About Their Rental Property

 

There are 5 questions every landlord needs to ask about their rental property.

Asking these five questions can save you thousands of dollars and whole lotta’ heartache!

In this video, Matthew Whita…

Hey everybody. I’m Matthew Whitaker with gkhouses and today I’m going to talk about five questions every new landlord needs to ask about their rental home.

I’m going to tell you a quick story about my first rental house and one of the mistakes that I made, and then that’s going to lead into some of the five things.

When I first bought a rental house, it was from one of the guys here in the office. I always blame him for getting me into this rental business. The house was absolutely covered in fleas. The house needed a ton of work and he sold me this house. I was so excited because I beat out some other investors for the house.

One of the things that I forgot to do was to look at how many trees in the yard actually needed to be cut down. It was not something I really thought about because I was so focused on the house that I had forgotten to take a step back and look and see the bigger picture.

So I hope that these five things that we’re going to talk about today helps you take a step back and look at the big picture.

Now, what happened with those trees? Well, basically I had to spend $2,000-2,500, extra dollars that I had not planned on spending, just because I didn’t drive up to a home and look up.

I always tell people, when they ask, “Well, what’s the first thing you look at when you go to look at a potential rental home to buy?”

The first thing I do is drive up and I look up in the air and see how many trees need to be cut down.

So let’s take a look at the five things you need to look at when you’re looking at buying your first rental home or buying a new rental home.

1. The Age of the Home – Now, the age of the home affects so many different things that it’ll really affect your return on your investment. One of the biggest things the age of the home affects is just your monthly repair and maintenance numbers.

You can imagine a house that was built in the 1940s or the 1950s, the systems in it are much older than a house that was built in the 2000s, so they’re going to break down more often. Certain systems, like the heating and air, may not have even been put in the house originally.

So those systems breaking down will actually cause you to have higher repair and maintenance. The walls are 50, 60, 70 years old; obviously, those are going to break down. The electrical, just items break down more often.

Your repair and maintenance numbers are higher when you’re talking about a house that was built earlier rather than a house that is more recent, so age of the home is the first thing I look at.

2. Street Scene of the Home – What do the houses look like around it? Remember, I talked about taking a step back and evaluating the house. This is one of the best ways to take a step back and evaluate that house.

What do the neighbors houses look like? Do the neighbors keep up their home?

We have a lot of rental houses that are absolutely great rental houses that simply don’t rent because the neighbors are trashy. They have cars in the yard, kids toys everywhere, grass grown two feet high.

What do the houses look like everywhere? Are there burnouts on the street? Are there people loitering around? It’s very important that you take a step back and evaluate the street scene. Don’t get so focused on the house that you forget about the bigger picture.

3. Rental Market Rate – One of the things we say, especially when you’re new at this, is to use some sort of objective opinion of market rate. This is a great place that a property manager would actually come in, helping you evaluate what the market rate will be.

Please don’t listen to somebody that’s trying to sell you the house at what the market rate would be. You need some sort of objective, third-party opinion, especially if you’re new.

Now, some of you more savvy, older investors that have been in this business a while, you can usually drive up to a house and know exactly what the market rate’s going to be. But if you’re just getting into the housing business, into the rental business, you want to be very focused on getting an objective opinion of market rate.

4. White Elephant Issues – Now, what is a white elephant? A white elephant is an issue that you can’t change that has an effect on the market rate or has an effect on the rentability of the home.

So white elephants can be living on a busy street, living near industrial park. We frequently see bedrooms where you have to walk through a bedroom to get to another bedroom. We see houses where the second bathroom is actually in the basement. So there’s only three bedrooms, one bathroom on the main level and a second bathroom in the basement level.

There’s so many different white elephant issues and a white elephant is not something you can necessarily change. You may be able to put a privacy fence up to avoid seeing all the industrial, but the house may be just next to the industrial and that’s not something you can change.

You need to be very – again, there’s the word – “objective” about identifying white elephant issues. Take a step back, evaluate the house as if you were a renter.

Would you want to walk through another bedroom to get to a bedroom? Would you want to go into the basement to take a shower?

Certainly people are willing to put up with these types of things, but it’s definitely going to affect the market rate of the home. So you need to be very mindful of how that’s going to affect the market rate of the home.

5. The Retail Market of the Home – Don’t just think that every home has a retail market. There are certain investor class neighborhoods where they’re always going to be bought by investors.

They’re investor homes that will never be owned by anything else other than an investor. So they’re going to trade on things like rent rates, and trade on things like cap rates.

There’s more B and A class neighborhoods that do have a retail value. So it’s very, very important that you’re mindful of, what is the retail value, or what is the real return value of that house.

What can I sell that house for? Again, this may be a place where you’d want to get an objective opinion if you’re just getting started.

So those are the five things, if I was a new investor, that I would look at when I’m buying my first, or some of my first, rental homes. I hope this has been helpful.

With any of these five, if you run into this situation or you’re evaluating a rental home and you’d like an objective, third-party opinion, that’s something we’ll do for free. So I hope you’ll reach out to us.

Should I Rent My House In Nashville?


Matthew Whitaker - Monday, March 14, 2016

Nashvile Skyline Sunset

Should I Rent My Home In Nashville?

Well, should you? And how can you know for sure?

Everyday someone is faced with the decision of whether renting their home in Nashville is a good idea. You may be faced with this decision for many different reasons.

In hot real estate markets, like Nashville, this question may be based on whether you would like the extra rental income or you plan on keeping it in the family for some reason.

In slower real estate markets, this issue is the question facing homeowners that are not able to sell their home.

Regardless of the reason, this question has very real and significant effects on your financials and should not be taken lightly. Through the rest of this article, we will review the positives and negatives of renting your Nashville property. We will finish with risk factors that must be considered.

The Positives of Renting Your Nashville Home

Many positives exist for the Nashville landlord, but before getting carried away, remember that the rental property industry traditionally is not a highly profitable industry immediately, but is very effective in building wealth for the long term. If you’re looking for a way to make a return in real estate faster, you will need to learn how to flip properties in your area. Here are the positives of renting your house Nashville home:

Cash flow on black blackboard with businessman

  • Extra Monthly Cash Flow – Through the monthly rent payment, the landlord creates an additional “passive” income stream. This additional income can be used for multiple purposes, such as, paying holding costs for having the property or growing additional equity in the home by making larger mortgage payments. How this is used, is up to the landlord.
  • Build Towards Retirement – Many landlords use Nashville rental real estate as a cornerstone of their retirement portfolio. You can do the same. Your home can be the start of a Nashville real estate portfolio that generates significant passive income into your golden years. Real estate is one of the best tools to use the principle of leverage to grow your assets at a faster rate.
  • Secure Additional Time – In many circumstances, you may simply need additional holding time to achieve your goals for the property. Renting the home may be the answer to this need. By holding the property for additional time, you may be able to benefit from property appreciation, securing of another loan, or helping you build equity to get “right-side-up” to be able to sell the property.
  • Tax Advantages (write-offs, 1031 exchanges, etc) – To help increase the availability of rental property, the government has built in incentives for landlords that are in addition to the standard mortgage interest deductions. Some examples of these incentives are below (we’re not tax professionals so make sure you check with one first!):

1. Writing off your Nashville rental property’s expenses against your income

2. Tax-favorable treatment upon the sale of the property (ex. 1031 exchange)

The Negatives of Renting Your Nashville Home

  • The Tenant will be Harder on Your Home – A false belief that many new landlords have is that the tenant will maintain the home as well as the homeowner would. 90% of the time, this is simply not the case. Tenants are generally harder on the home and not as attentive to its unique needs. Expectations should be clearly outlined with potential tenants, but the landlord also needs to align his/her expectations. It’s helpful to understand the average life expectancies for certain home repairs and equipment.
  • Keeping an Emergency Fund – Although I hope that you always have an emergency fund on hand for life’s surprises, you will want to maintain a larger fund for your rental home’s unexpected repairs or default in rent payments. The landlord is responsible for maintained habitable living conditions at all times and any repairs that need to be made to maintain these conditions must be completed within a timely manner or the tenant may have case for recourse against the landlord. Not having the funds to make the repair is not an excuse. For the homeowner, when you have something that needs to be repaired, you can simply determine and rank the importance based on your ability to pay for the repair. This isn’t the case when you become a landlord. Your tenant will expect (and rightfully so) that repairs will be made in a timely manner.
  • Cropped image of female accountant working on financial reportBookkeeping, Tax Reporting and Exposure to Liability – When you undertake a rental property, understand that this is a business venture with specific laws surrounding it. You will want to keep a clear record of all of your expenses and consult tax professionals to ensure that you are reporting everything properly and gaining every advantage afforded to you. Also, realize that there are many laws surrounding the selection of tenants and the management of interactions with them. Make sure that you have read and understand these laws, both federal and local Tennessee laws. The last things that you want is a lawsuit due to your violation of Equal Housing Opportunity laws or Tennessee Landlord Tenant Statutes.
  • Increased Responsibility – When you are a landlord, expect to be the person that receives phone calls regardless of the day or time. If something breaks, you need to have a process for seeing the issue through to completion. You have responsibility as listed above for following additional laws. You are responsible for finding, showing and leasing the home. And if all of that is not enough, you are the go-to person for collecting rent when the tenant fails to pay on time. When I first started to rent houses, this was the biggest adjustment I had to make. I’ll never forget receiving those calls at 2am because a water leak had caused the ceiling to fall on one of my tenants while she was asleep. As you can imagine, that was not a pleasant phone call!
  • Initial Repairs Needed – Before rushing into the decision to rent your home, first make sure that an initial outlay of capital is not required to
Tired young couple are sitting on the floor with paint brush and bucket while doing repair at home.
.

get the home in marketable condition. Even though the Nashville rental market is hot, a sub-par product will not rent due to the other competition. It may take additional funds to get your home to a marketable condition. We explain to our owners that if a house sits on the rental market for a period of time, there is either a price or product problem.

 

 

Risk Factors to Consider When Renting Your Nashville Home

  • A large track hoe excavator tearing down an old house.

    Tenant Trashing Your Home – This is one of the two largest fears a homeowner has when considering whether or not to rent their home. If a tenant trashes your home and leaves you with a large rehab job before you can rent it again, it becomes a frustrating circumstance. Even if the tenant pays rent every month, they still may cause damage to the home that must be fixed to rent it again. As a matter of fact, based on our experience, a rental house will need work performed about 90% of the time before you rent it again. You must plan on this happening and be happy when it does not.

 

  • Slow-pay, No-pay or Eviction – This is the second of the two biggest fears a homeowner has when considering whether or not to rent their home. A tenant that pays rent late, does not pay, or must be evicted is also a risk that should not be ignored. This can cause financial issues if the landlord is not prepared. Months of no income. Rehab costs to get the home rent ready again. The cost to evict a tenant. Expense of marketing a home to get it rented again. All of the costs add up…and don’t forget your time…that’s worth something, right?
  • Multiple Problems at Once – Worst-case scenarios can have compounding effects. Make sure that you do not put yourself in position so that one negative event can turn into 2 or 3 negative situations in your financial life. An example of this could be you having a significant decrease in your monthly income and, consequently, not being prepared to absorb a second negative occurrence involving your rental home. If you could not handle a repair call or vacancy during this time because your budget is too tight, you may need to re-think renting your home.
  • Type of Financing – Before renting your home, be sure that you have verified the type of financing that you have on your home. Some loan payoff schedules (ex. balloon) would not be conducive to a long-term rental scenario. Know your time horizon and make sure that your financing can see you through.
  • Location and Trends – Before renting your home, make sure that the extra holding time will be beneficial to you. Look at the trends in your neighborhood and decide whether you believe the property value will increase or decrease during the additional holding time. If it will decrease, it may be time to sell and look in other locations. This is extremely important in larger cities like Nashville.
  • Deferred or Impending Maintenance – Before renting your home, be aware of impending maintenance items that will be required. A new roof or replacement of an HVAC unit should not come as a surprise and should be planned for. If any of these repairs are seeming likely in the near future, make sure to include that in your calculations and reserve funds.

In summary, realize that there are many things to consider prior to flippantly deciding to rent your Nashville home. One poor or miscalculated decision can cost you dramatically. Ask the right questions and use your best judgement. If your due diligence is thorough and all signs point to ‘yes’, you are well on your way to owning a portfolio of profitable Nashville rental homes.

7 Signs You Have a Nightmare Tenant


Spencer Sutton - Friday, March 11, 2016

A blue nametag sticker with words Hello I Am Your Worst Nightmare that might be worn by a dissatisfied, angry customer or someone complaining or being cranky

7 Signs You Have a Nightmare Tenant

Do you have a nightmare tenant living in your rental house?

When most people decide to rent their house, they have the best intentions.

That’s because we want to believe the best about people. We want to believe that the person we choose to live in our house will treat it like their own.

The truth is that some do…and some don’t. And most homeowners don’t really know the kind of tenant they have until the person moves in and has been there a few months.

The key is to have an extremely disciplined underwriting process for screening your tenant.

But you may already have a tenant. A tenant you placed yourself…or a tenant that a local property manager placed on your behalf.

Either way, you need to know what to look for so that you can determine if you have rented your house to a great tenant…or a tenant who is going to invade your nightmares and cause you to wake up in a cold sweat!

It may not start out as a nightmare, but if you notice these signs…beware…it could turn into a nightmare!

Here are the 7 signs you have a nightmare tenant:

  1. You never receive maintenance requests – Most of you are probably thinking, “I hope I never get a maintenance call from my tenants!” However, we want to suggest that if you don’t hear from your tenant, it could possibly mean that they’re hiding something. What could that be? It’s hard to say…it could anything from a messy house to negligent damage. You never want something like a small water leak continue until it’s a much bigger job than what it should have been. We give our owners the option to sign up for quarterly property inspections. We enter the home, take pictures, and send a report back to the owner. If our inspection turns up anything that we believe an owner should be concerned about, we let them know.
  2. You receive notice from the City to cut the grass or clean up the yard – I know it’s hard toHorizontal shot of dirty lawnmower in overgrown grassbelieve…but not everyone has the same cleanliness and sanitation practices as you. And if your tenant happens to be one of those people who is not too keen on cutting grass or taking out the garbage, you could have a problem. If this is the case, you might receive a nice notice from the City concerning your property. When you receive one of these notices, it’s not good news. It means that something is going on at your rental house that has caught the attention of the city! And if it’s something that caught their attention…you better believe the entire neighborhood is not happy about the condition of your property. I once received a notice from the city about trash needing to be removed from the yard. When I arrived, the entire back deck was covered in garbage sacks. This means that there were plenty of rodents, roaches, and other creepy creatures that had to be dealt with to make sure the property was sanitary again. If you get a notice from the city, you could have a bad tenant.
  3. The neighbors regularly complain about the tenant – If you lived in your house before you started to rent it out, the chances are that you know your neighbors. And if you have a good relationship with your neighbors, they will feel obligated to let you know about anything strange going on at your house. They will especially let you know if it’s something that disturbed their ‘peace and quiet’….and they should! Wouldn’t you want to know if there were always cars parked on your lawn? Or regular parties into the wee hours of the evening…or pets that are keeping them up all hours of the night. Whether you want to believe it or not, your tenants are an extension of you…especially if you were the one that placed them in the home.
  4. They are not keeping the utilities on – You may not believe whether the tenant keeps the utilities on or not is a big deal to you…but it has more to do with you than you know. A tenant that does not maintain their utilities could end up costing you thousands of dollars. If they don’t pay the power bill, the power company may possibly red tag the meter. If this happens, you will receive a visit from the electrical inspected of your local municipality before they agree to turn the power back on at your house. If they believe your home needs an electrical upgrade, that tenant’s $400 power bill just cost you thousands of dollars. If the gas has been turned off, your tenant may start using space heaters which can short outlets and may cause fire. That’s liability you don’t want in your life! One more problem, if the equipment that is supplied by these utilities are not running, they will break down like a car that sits for long periods of time. Remember, if it’s not running, its rusting…
  5. They are not paying rent and calling in bogus maintenance request – This is a classic move that a nightmare tenant loves to pull. It’s the tenant that you never hear from until they stop paying you rent. When they stop paying rent, everything in the house starts falling apart. Most of the time they are looking for reasons to blame you for their non payment of rent. Before they stopped paying rent, you didn’t hear from them…now, every crack in the wall and squeak in the floor is an issue. Pay attention to these tenants because they are more than likely going to bail out and leave your house unattended. Once their balance becomes too high for them to pay they, will abandon your home and leave it wide open in most cases…especially if you have started the eviction process.
  6. You cannot contact them and when you go by the house, someone else is always answering the door – This can be a problem in more ways than one. If you visit your rental house (on multiple occasions) and the person answering the door is not who you leased your house to, it could mean that a) they have additional people living in the home who are not on the lease or b) they are subletting your house. This may not seem like a big deal, but when they stop paying and you attempt to evict them you don’t know the names of the people that you are evicting. This can make it harder to legally remove the squatters and get your house back on the market in a timely manner.
  7. Angry man speaks on the phoneThey have a terrible attitude – Everyone has bad days…and that’s no different for tenants than it is for you and me. But when you have a tenant that blatantly behaves in a disrespectful and abusive manner, you have a nightmare tenant. These kinds of tenants are looking to blame you, the landlord, for any and everything possible.

 

 

  • You didn’t repair the broken cabinet door fast enough…
  • You didn’t answer the phone when they called after hours…
  • You charged a late fee even after they gave you their best excuse…

This list could go on to ‘z’…but I think you get the picture. If their attitude stinks, chances are your relationship will be the same.

Nightmare tenants are a dime a dozen…and great tenants are sometimes hard to find.

Do your best to avoid the nightmare tenant by doing your homework and screening your tenants the right way.

And if you think you need help, make sure to give us a call…we’re experts at finding the best tenants for your rental houses!

3 Questions Homeowners Ask Property Managers


Matthew Whitaker - Tuesday, March 8, 2016

What are the 3 questions homeowners ask property managers?

In this video, Matthew walks through the most common questions. There’s also a transcript below the video.

Three Questions Homeowners Ask Property Managers





There are usually 3 questions homeowners ask property managers when they call. In this video we walk through the most common ones.

Hey everyone, I’m Matthew Whitaker with GK Houses, and I’m going to talk about a subject today that potential incoming clients are always asking. It’s the three biggest questions they ask us.

The questions are:

  1. How quickly can you rent my home?
  2. How do you keep from renting it to the wrong person?
  3. How much do you cost?

Let’s take a look at them.

The first one is, how quickly can you rent my home? Right now we’re renting houses at an incredible pace.

I think that’s just because of the size of our portfolio and the numbers that we’re able to generate. Right now we’re actually leasing homes, signing the leases in less than three weeks from the time that we have it 100% marketed.

From a move-in standpoint, we’re actually able to do that in less than five weeks. So once we get your house 100% marketed, pictures, a good description, everything pushed out to the Internet, you should start receiving rent within five weeks.

That’s if we have everything priced appropriately, the house looks great, everything that we need to do. We call that price and product, making sure the price and the product match. That’s what we call market ready.

The second question is, how do you keep from leasing my house to the wrong tenant?

I think this is an important question, because you don’t want to get the wrong tenant in your house. You want to make sure on the front end that you don’t ever get them in, you don’t have evictions, they don’t tear up the house.

So we have a five step process to make sure that we don’t lease it to the wrong person. The five steps we look at from an application underwriting standpoint is…

  • credit score
  • ability to pay
  • rent verification
  • work history verification
  • a criminal check.

Let’s take a look at those individually. A credit score. A credit score is completely based on the amount of rent for the home. So under 800 has a 520 credit score. Over 800 has a 580 credit score.

The second thing is just income. We want to make sure the tenant makes at least three times gross the monthly rent. If somebody had to ask me what’s the one thing, if I could only look at one thing to underwrite an application that produces a good paying tenant, it’s this metric.

Three is really the minimum. I would never go below three. Once you get to four and five you’re really going to have a successful experience with that tenant.

The next thing is to look at rent history. We want to talk to the landlords that they’ve rented with and make sure that they paid their rent on time, that they’ve taken care of the home, that they’d rent to them again. Those are the types of questions that we ask.

The next thing is we want to make sure that they even have a job today. You’d be surprised how many people apply. They had a job. They were able to submit pay stubs, and now all of a sudden they don’t have a job. The last thing we want to do is move somebody in and have them have just lost a job and not be able to pay.

And then the last thing is criminal background check. Obviously we don’t want violent felons or somebody with a history of multiple violent misdemeanors in the home. We want to make sure that there’s a fine upstanding human being living in that house.

The third question most people ask is, how much do we cost?

Well, one of the things is that property managers are all over the place in terms of what they charge homeowners. I’m going to put at the bottom of this blog article our three packages. We have a silver package, we have a gold package, and we have a platinum package.

The silver package is kind of our base rate. You’re going to get just kind of basic property management out of this. There’s nothing wrong with the silver package. It’s what most property managers do.

That’s obviously us accounting for all the rent, making sure the rent’s paid, underwriting their applications, making sure we get good tenants. You’re going to get a great experience at the silver package.

For those of you that want kind of the step up, you might want to go with the gold package. Now this has some other services that we think are kind of preventive maintenance services. We want to also not just manage in reactive mode. We want to manage in a proactive mode. That’s kind of what the gold package gets you.

The platinum package is kind of the everything package. It includes an extra rent guarantee. That is something that we’re offering that’s something super exciting that a lot of homeowners are excited about the idea of having that as kind of a fallback in case something does go wrong.

So what do we charge? Take a look at those packages and we’ll be very transparent about what we charge.

*The packages described below are for owners of between one and four houses. Investors with five or more houses managed by gkhouses.com have should call for discount volume pricing.

Silver Package

  • Management Fee – 10% of rent collected
  • Leasing Fee (paid after a tenant is placed in a vacant house) – 1st Month’s Rent

Gold Package

  • Management Fee – 9% of rent collected
  • Leasing Fee – 1st Month’s Rent
  • Eviction Protection Plan, Gutter Cleaning, HVAC Preventative Check-up, Quarterly Inspection – $70per month

Platinum Package

  • Management Fee – 8% of rent collected
  • Leasing Fee – Half Of The First Month’s Rent
  • Eviction Protection Plan, Gutter Service, HVAC Prevention and Quarterly Inspection – $70per month
  • Rent Protection – 6 months of guaranteed rent should your tenant stop paying and go through the eviction process. You will get paid the monthly rent regardless. – 1 Month’s Rent (prorated monthly)

5 Traits of a Poor Property Manager


Spencer Sutton - Friday, March 4, 2016

overworked unhappy bald Hispanic businessman in stress wearing suit and tie at office holding help sign working on desk with computer laptop looking frustrated and anxious

These 5 traits of a poor property manager should make you think twice about letting them manage your rental property.

After managing over a thousand properties, renting to over 10,000 tenants, and working with hundreds of owners, we have found that property management is a business of systems and processes.

And for the most part, it’s a pretty thankless job! However, it’s an extremely important job. Providing paying tenants a great place to live and helping owners capitalize on their investment is a time intensive job.

Since these systems and process start over every month, you would expect that most property managers should be able to develop good habits in order to manage both their portfolio and all of the tasks that go along with professional management.

Unfortunately, this is not always how it works out and simply having the title of a manager does not mean that you are good at it. We decided to point out a few hallmarks of a manager that may have trouble managing himself efficiently, much less, your property.

Here’s the list:

  • Dis-organized and Bad Record Keeping
  • Avoidance of Tough Issues or Conversations
  • Discourtesy
  • Not “Walking the Talk”
  • Embracing the Status Quo

Let’s look at each of these in depth.

Dis-organized and Bad Record Keeping

Messy workplace with stack of old paper

In the world of property management, there is no shortage of daily transactions that take place. On top of that, there are massive amounts of communication that must be handled with owners and tenants on a daily basis.

Most of the financial transactions and records involve other people’s money and most communication deals with someone else’s multi $100,000 asset. On top of this, the real estate industry falls in the shadow of Fair Housing Laws where a simple mistake, whether intentional or not, could cause a lawsuit that could result in $100,000’s of loss. Needless to say, dis-organization and bad record keeping can cost you in many ways.

Avoidance of Tough Issues or Conversations

We’re not throwing a pity-party around here but the truth is that property managers have a hard job.

A great month is the month that you do not hear from your property manager because it means that everything went right! Most of the time, a property manager is the deliverer of bad news.

Whether a sewer line needs to be replaced, an HVAC unit needs repaired, or a tenant did not pay rent, all the property owner hears is, “You need to spend or send money”.

A property manager must be confident enough in themselves to deliver this hard truth and not avoid potentially tough conversations. Regardless whether the property manager sugar-coats the news or not, the truth will come to the surface eventually.

Wouldn’t you rather know the truth today so that you can plan accordingly? It always amazes me how many property managers struggle with facing the tough issues and delay, thus costing the property owner a tremendous amount of money. A property manager who can’t have tough conversations in a timely manner need to find another line of work.

Discourtesy

Middle-aged man holds telephone while woman screams at it

While facing the tough issues and delivering the hard truth, a property manager must always remember not to allow their emotions to get to them.

Property owners will be upset and tenants generally are not happy with the outcome of the situation that, “No we can not waive that late fee, again, for the 6th month in a row“.

Through this, a good property manager will always keep the Landlord Tenant Law and Fair Housing Compliance front and center so that he can lead his property owner to a decision that protects from liability, as well as, helps the property owner profit the most amount of money.

Many times, delivering bad new to a tenant, a.k.a. someone that could destroy your home if made mad, is something that must be handled with kid gloves because the alternative, well, is just not a good option.

We’ve heard of managers who threaten both tenants and owners on the phone and in person. From what I recall of Dale Carnegie’s classic, How To Win Friends And Influence People, threatening your customers with bodily harm is frowned upon!

Not “Walking the Talk”

Businessman or student walking his fingers up wooden steps resembling a staircase mounted in rustic wooden boards in a conceptual image of personal and career development success and aspiration.

It is very easy in the property management world to say what needs to be done, but when the daily grind hits, it takes tremendous discipline and focus to ensure that you are not pulled in every direction.

A property manager must focus on the most important tasks of managing the property for the home owner.

It is always necessary for a property manager to develop processes to ensure that the daily, weekly and monthly tasks get accomplished every time on time. A good property manager is someone that follows through on doing what they said they would with a level of professional excellence that should be expected.

At gkhouses we have a series of meetings each day, week, month and quarter to ensure that the most important work is being accomplished. Here is a schedule of our meetings:

  • Departmental Huddle – Each team member meets within their specific department to review what was accomplished the day before and set a ‘most important to be accomplished’ schedule for the day
  • Daily Office Huddle – The entire office meets up front for around 10 minutes for any cross-departmental communication. This helps us cut down on emails and interruptions during the day.
  • Level 10 Meeting – Once a week we have an office meeting where we do what we call IDS…we Identify, Discuss, and Solve issues within the business. This is a time for everyone to have input and move the company forward.
  • Leadership Level 10 Meeting – This is just like the normal Level 10, but for the Leadership Team to discuss larger issues that have more to do with strategy, financial issues and personnel decisions.
  • One to Ones Within Departments – Each Department Leader meets once a month with their team on an individual basis to review the months accomplishments and plan for the upcoming month.
  • Quarterly Leadership Meetings – The Leadership Team goes offsite once a quarter to asses how we’ve done on a goals and plan for the next 90 days.
  • Scrum – This is what we call our ‘special projects’ planning. It comes from the book Scrum and has helped us map out every detail of what needs to be accomplished in a particular project.

Embracing the Status Quo

No matter how long a property manager has been in the business, they don’t know everything. In the world of technology that we all live in, a property managers that cling to the “how they have always done it” mantra, sink. A property manager must be willing to listen to ideas and not be too proud to admit that your idea, is a good idea.

A good property manager sources good ideas from wherever possible so that he can continually grow to offer you better service. In the property management business, being afraid to “shake things up” can leaving you wondering what happened.

We enjoy getting together with other property managers in Birmingham and Nashville in order to share helpful management tips and learn ourselves.

In Conclusion

We hope that this list of traits that a poor property manager has helps offer insight into how a quality property manager operates.

We hope that it helps you select the property management company that is right for you. If you have any questions, please do not hesitate to contact us by calling (205) 940-6363 ext 3 if you have property in Birmingham or (615) 925-3880 if you have a property in Nashville.

How Much is My Rental Home Worth If I Wanted To Sell


Matthew Whitaker - Wednesday, March 2, 2016

How Much is My Rental Home Worth?

Question marks. Idea or problem concept. 3d
Yesterday a family member called me about selling a rental house he owns. He said the home needed some work and he was calling me for some advice. It struck me when he called that I seem to have this conversation with one of our clients about once per week.

How much is my rental home worth?

I purchased my first home back in 2002 at the age of 22. Since then, I’ve purchased hundreds of homes and currently manage over 1,000. This is a question we receive often enough that I think it is important to address it.

While I’m not sure the best way to address it, I’m going to share with you what I shared with the member of my family. Hopefully it will be helpful.

It has been my observation that there are two types of people who buy homes in Birmingham. People who purchase it and plan to live in the home (we call them “retail” buyers) and people who buy and sell houses for a living (we call them “wholesale” buyers or “investors”). I’m going to cover the way each person purchases a home and the pros and cons with selling to each.

Retail buyers

In our world, retail buyers are the end user who will be living in the home. This is how the majority of homes in the Birmingham area change hands. One person who lives in the home sells it to another person who is going to live in the home. This is the everyday transaction that you are accustomed to seeing. Below are some thoughts on selling to a retail buyer.

  1. They buy on emotion – As I said, I’ve purchased hundreds of homes. I don’t get too emotional about buying homes anymore; EXCEPT the one I currently live in! I’m willing to spend more money on the home I’m going to live in than I would if I was buying it as an investment. That is why it is an emotional buy (even for me). Additionally, they buy out of emotion, because they see themselves having experiences in the home itself. They don’t walk into the dining room and see the dining room; they see themselves having Thanksgiving dinner at the table with family. The don’t see a living room; they see themselves watching a movie by the fireplace.
  2. They pay more money – Because they are emotional buyers, they will pay more money for the home. This is typical to any type of emotional purchase.
  3. They are picky – Retail buyers have a list of things they want and they are picky about about meeting that huge list.
  4. They need a completed home – The majority of retail buyers are looking for a home they can move into immediately. Sure, they will paint one or two bedrooms to “make it their own”, but they will rarely redo the kitchen or refinish the hardwoods. So when selling a home to them, the home must be complete.
  5. They are in moderate to high income areas – People that live in low income housing typically don’t have money or the credit to purchase a home. So certain areas don’t regularly work for retail homes.

Bottom line, when selling your rental home to a retail buyer, it is going to take some work. You will need to provide a finished house in the right location. The good news is that it will sell for more money if you put in the time and effort.

Investors

This is most likely who you will be selling your rental home to. . . another investor. Below are some pros and cons of selling to an investor.

  1. They buy at a discount – By virtue of the very fact they are trying to make money, they will simply pay less for the house.
  2. They are less emotional, so they are buying typically using a formula – I know your next question is, “What is the formula?” While the formulas change and are unique to each investor, I’ll try to help you understand what types of things are included in the formula below.
  3. They will typically buy “as is” – Meaning, you won’t have to do much to the home when you sell it to them. Some, not all, will have a home inspection. But, all in all, it is an easy transaction.
  4. They will pay closing costs – This is typical, because they want to control how the transaction gets closed and this is the best way to do it.
  5. They usually pay cash and don’t require a loan – Which is nice, because house sales fall through when people can’t get financed for the home.
  6. They are typically in low to moderate income neighborhoods – This is usually where the best rental returns are located.

So what’s the formula?

Investors purchase homes a million different ways, but most of them can be lumped into two categories . . . “landlords” and “retail sellers”.

Here is the difference and some generalities regarding the formulas they use to buy homes . . .

Landlords purchase homes in an effort to lease them to a tenant and make money every month from the monthly rent. Their formula typically consists of 5 items:

Rent – (Income) What do they feel like the market rate for the home is going to be when they list it for rent? This takes into account where the home is, how many bedrooms, all the amenities of the home.

Taxes – (Expense) This is the money paid to the county for real estate taxes. Keep in mind this typically more (almost double in Jefferson County) than a typical homeowner would pay.

Insurance – (Expense) Insurance costs increase when a tenant is living in the home instead of the actual homeowner.

Interest – (Expense) If the landlord has a mortgage, they take this payment into account when they are putting their formula together.

Repairs and Maintenance – (Expense) Savvy landlords go ahead and account for some level of work needing to be done to the home on a regular basis. They don’t expect everything to go right all the time.

Using these 5 items, landlords will put together a return potential based on the cash they have on hand and their assumptions of the above items. If you know the information that is specific to your home like insurance and taxes, you can create some assumptions about repairs and maintenance and rent to get to a return and a good idea of what someone would be willing to pay for it.

Retail Sellers are a little bit different. They are in the business of purchasing a home, renovating it and putting it on the open market to sell it to a retail buyer. They buy at wholesale and sell at retail and make money for doing so.

The retail seller’s formula consists of the following items . . .

  • Potential sales price – They start with the end in mind and work backwards from that number. What will someone pay for the home when they are complete with the renovation. It really is speculation at it’s best!
  • Costs to sell the home – This is typically real estate commissions and closing costs that the retail seller will pay when they are selling at their potential sales price.
  • Work needed to update/renovate the home – How much money will they be putting into the home in labor and materials to get the home looking like the end product they expect will realize the potential sales price.
  • Interest – For most of the retail sellers, they will account for having debt, even if they don’t use a loan. Their money would be making money somewhere else, so they account for making the money here. They will typically plan on carrying the debt, therefore paying the interest, for a certain period of time.
  • Taxes – just like above, they have to pay non-homestead exempt taxes during the time they own the home.
  • Profit – They account for how much money they want to make once this thing is all said and done. Typically the profit coincides with the amount of money that is at risk. Thus a $100,000 investment would make less profit than a $200,000 investment.

Once this is all accounted for, they typically come up with an offer price. You can take the same information and attempt to plug in numbers to realize what you think your home would be worth using some realistic assumptions.

The advice I told my family member

Business People Light Bulb Innovation Jigsaw Togetherness Concepts

After spending some time with my family member explaining the above scenarios I explained that there was really only two ways to make money in the house business. Time and money. He could invest the time and money to work on the rental home and realize whatever (be it a rental return as he was getting or a retail return) or he could sell the home to someone who would invest the time. If he decided to sell it, then he should expect someone to purchase it at a discount – because there is no other reason for someone to purchase a home that needs work, except to make money.

My biggest advice, since he had lived there at one time was, to do his best to disconnect himself from the situation and be as objective when deciding what to pursue as possible.

I’m actually shocked I even got the call. Most family members make decisions that I’m an expert in (houses) without even asking my opinion. I’m not sure if I gave him the answer he was looking for. I’m just like a good attorney . . . “It depends”.

Conclusion

Bottom line is you ought to be able to come up with a good idea of what someone would be willing to pay for your rental house using some very basic assumptions. I urge you to take the assumptions and do your best to answer the question to come up with the best course of action when looking at selling your rental home.

Overcoming Fears of the Leasing Process


Matthew Whitaker - Tuesday, March 1, 2016

One of the benefits of working with gkhouses is our leasing department. We are extremely focused and disciplined in our marketing and screening process.

Just last year we rented 421 houses.

Caroline Teal is a part of our leasing department and Matthew Whitaker recently interviewed her about our process.

You can find a full transcript of the the interview below this video.

Matthew and Caroline





In this video Matthew and Caroline discuss typical fears that owners have when they think of leasing their house.

Matthew: Hey, everybody. I’m Matthew Whitaker.

Caroline: I’m Caroline Teal.

Matthew: And we’re here with GK Houses and we’re going to discuss leasing.

Now, one of the things we know about owners is they have some serious fears about leasing, especially people that do it themselves, so we’re going to discuss things that are owners’ fears.

Things like, “How do I keep from renting to the wrong tenant? They may tear it up. How do I keep a bad person from moving in? How do I rent the house quickly?”

So, we’re going to jump into some of those questions, address them, and hopefully you will find it to be helpful. I brought some questions.

We’re going to ask the resident authority at gkhouses, so we’re going to dive right in.

So Caroline, let’s start with a typical day for you.

What does a typical day look like just for you?

Caroline: So, I would say it’s going to probably begin with looking at what I currently have available. First and foremost, making sure that everything is marketing correctly and to the best of our ability.

I want to make sure that all marketing photos are correct and are a great quality, making sure that all the information that we’re presenting to prospective tenants is also accurate. And of course, looking at all the inquiries we’re getting, looking at the flow of questions, and maybe even concerns for certain properties.

That’s probably my biggest thing. And then of course, handling applications, new applications, pending applications, and trying to speed up that process, and working with each and every applicant as fast as I can.

And then hopefully signing a lease.

Matthew: So, one of the things that’s really important, and this is kind of a pointer for everybody, is getting the right information online, because I saw a statistic recently that it’s like 60 of 70% of people actually will see it online before they ever decide to go see it.

So, the important thing would be making sure there’s great pictures online, making sure there’s a great description, making sure that we’re selling that property, because the whole goal is to get a tenant to go see it. And then once they go see it, the whole goal’s to get them to apply.

So, talk to me about what’s the most houses you’ve had available at one time?

Caroline: I would say since I’ve been here, the most houses we’ve had available at one point in time was 150.

Matthew: Okay. And so what would be the benefit to an owner of working with a company like ours that has 150 houses available?

If I was an owner, one of my biggest fears would be like, “Dang, that’s too many. How does Caroline keep up with it? How do we make sure that we don’t forget about a house?”

Caroline: Typically they’re going to see signs outside houses. I have people tell me all the time they see our houses everywhere, they see our name everywhere, whether that be out in yards or on the Internet itself. So, when they come in, they’re pretty well aware of us already. I don’t really have to give them much of a background, which is awesome.

And then of course with having that large inventory available, that leaves room for more opportunities for each owner and each individual, so if you have an interested person in one property, but they go to visit and it maybe not be exactly what they’re looking for, we’re going to have 149 other options that might be just the right property for them.

Matthew: And so, I think one of the things to point out too is just being with a large property manager gives credibility to tenants.

One of the great things about us is we’ve become a source for people in Birmingham to find houses to rent. So, the next thing too, and I kind of jumped ahead of our questions here, but tell us a little bit about the marketing on it.

Again, one of my fears would be, as an owner, “How do they keep from missing my house? Maybe they get 149 right, but then miss mine.” How do you make sure that doesn’t happen?

Caroline: Right. So, I think with having a large number of other homes that I can compare with that are on the market at the same time, maybe even in the same area, I’m able to accurately price a home and hoping that it will rent in a short amount of time and to a qualified tenant.

So, every week what I’ll do is I’ll go through our current availability, all of our current homes, look at them, sort them by the date they started marketing, and ask myself, “Okay, if it’s been really over…” I mean, I’m looking at it in three weeks, because I want to be more aggressive than not.

And look at the potential feedback, look at the number of showings, and if we’ve received any applications, and I move forward from there and try to figure out the best path to move forward with that property.

Matthew: And I think one of the things to point out too is we actually have a team audit too, so you do it individually and then we get in here every Friday as a team and basically look at all the marketed properties.

So, we’re going through and saying, “Hey,” we’re talking to Frankie, who’s our leasing agent, “Why is this house not leasing? What are people saying about it?” And we always have that price and product. Is this something that we need to drop the price because of the product, or is there something that we can do that’s keeping that house from leasing?

Caroline: Right. I think it’s incredibly valuable to have myself in here that deals with leasing, the leasing agent, and then also the property manager himself, who’s been at the property, very familiar with the property, and maybe possibly good or bad things about it. So, I think it’s important to have everybody’s input.

Matthew: So, tell me, one of the other questions I think an owner would have is, “How long does it take to rent my house?” So, if I’m an owner and I’m coming to you and you’re the person that’s renting all these houses, what’s your answer to that question?

Caroline: So, something that we started this past year is recording the time it takes for the house to not only be 100% marketed, but also the time it takes to sign the lease and move somebody in. So, currently we’re looking at less than three weeks to sign a lease, and then less than five or less to move the tenant in.

Matthew: Five or less weeks total. So, from the time that we start 100% marketing a property, we’re signing a lease in less than three weeks on average, and then the tenant’s moving in in less than five weeks total from the time we started marketing.

Caroline: Right. And something to take into consideration there is that, as I mentioned, it takes two to three, on average, business days to go through that approval process.

So, with that, it’s not a 20-minute turnaround time, and that’s just because we do want to guarantee our owners that we’re placing a qualified tenant.

You’re taking in the application process, which honestly can take a couple of days, and then add in signing a lease and time for that person to be prepared to move in. So, I think being able to do that in three weeks and then five weeks is great.

Matthew: And then you said something that I think is important; a qualified tenant. One of the things that I believe is that a qualified tenant comes from getting this house out to a lot of people, showing a lot of people, getting a lot of applications. You get a lot of applications. I think at one point, one month, you got like 500 applications.

And so, how do we underwrite those applications? What do we look for? Because I think that addresses the fear of, “How do you make sure that the wrong person doesn’t get into my house?”

Caroline: We actually send out our applications to a third party that’s dedicated, five days a week, to look over every one of our applications. I think with that, you’re relieving any biased opinions.

So, it’s very difficult when I do have an applicant in here who is telling me the reasoning behind their bad credit, or criminal background, or something of that nature, and as a human, it is hard sometimes to look past that, but I think that that’s why we have this third party.

Matthew: And so, what we’ve done is we’ve basically said, “Hey,” this third party, “This is our criteria. We’re not going to deviate from the criteria. If we have to show the house 100 times, get 100 applications, this is the criteria to rent the house.” And so, that’s what kind of produces a good tenant.

All right, so the next question I want to talk about is when an owner has a house available, they’re always curious, like, “What’s going on? How many people have seen it? What are people saying?” So, what type of information does GK provide their owners?

Caroline: In the weekly email that’s sent out, it’s going to give each owner how many applications have been received total, how many that week, how many showings total, and how many showings that week, so they’re constantly being updated on the status of the home.

When a home’s marketing and I do see that it’s been over maybe a month and we haven’t had a tenant yet, I would say I have a look at the feedback that’s received.

We do receive a lot of feedback. Every single day, there’s going to be somebody who’s going to view a house with our leasing agent, or independently. We do have both options, depending on the property.

And so, I will gather that information and look at, as you mentioned, product or price. So, we’ll make suggestions maybe that have been commented on repeatedly, or look at the price and maybe consider a price reduction or even a rent promotion.

Matthew: Good. Well, I appreciate your help. And this is “Overcoming Fears of the Leasing Process,” and I hope it was a helpful video.