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Tenants, Toilets, and Other Rental Property Repairs

Rental Property RepairsBeing a rental property owner means dealing with maintenance, repairs and tenant upgrade requests. Even if you’ve hired a property manager, you will still have decisions to make regarding the upkeep of your property.

In general, you should set a maintenance schedule that keeps your property and the unit(s) in your property in the best shape possible. There are several reasons for doing this, but the biggest one is that a property that is kept in good condition attracts and keeps good tenants. The second big reason for doing this is that regular maintenance is often a good way to keep costs down. If you leave things unfixed for long periods of time it can cause other issues. For example, a leaky sink left unfixed could be damaging the cupboards and even the floor underneath the sink.

If you have a property manager ask about their schedule for doing the following things. If you manager your own property, then here’s a suggested schedule for checking on things.

Monthly:
Walk the exterior of the property and pick up garbage from around the property. Make sure the lawn is mowed, weeds are pulled and everything is in good shape. If you have laundry facilities, check that the lint is being removed from the dryers and take out any money if they are coin operated.

Quarterly:
Check windows, doors, and exterior of the house for any leaks or damage. It’s also a good time to check on the furnace or air conditioner and change filters.

Semi-annually:
Change the batteries in the smoke detectors, check carbon monoxide detectors, clean gutters, check appliances, plumbing and electrical outlets in the house. Check for things that might be loose as well (door knobs, railings, or screws). You aren’t looking for things to fix but you want to be aware of things that may require maintenance when a tenant moves out or trying to find little things to repair cheaply as a way to prevent bigger problems later on.

When tenants move out:
Have the carpets and drapery cleaned. Paint the walls if necessary (and usually it is), and get the unit professionally cleaned (including the stove and fridge).

Planning for this regular maintenance on your rental property makes things fairly easy. You will have a good idea of when major expenses like a new roof, a dishwasher or a paint job will be required. You can set aside a little extra rent money to cover these costs. The trickier part can be knowing when to make improvements to a rental property when a tenant is asking you to spend money.

In our Toronto tri-plex we recently turned down our tenant’s request for blinds in the living room of one unit. But at the same time, we agreed to put in a new toilet in another unit. Our tenants can easily figure out that we’re bringing in nearly $4,000 in rent per month from this property, so they may think we’re being stingy by refusing their requests. But, you have to keep in mind that, while you want to keep your tenants happy the money your spending needs to either prevent or reduce an expense or it needs to generate revenue.

In the case of a renovation or upgrade requested by a tenant, we ask ourselves a few questions when we’re considering whether to do the work the tenant is asking for:

  • What are the costs of not doing it (is the tenant likely to leave and what will that cost if they do?)?
  • Is there another way to address the problem?
  • Are there any issues with delaying the expenditure?

After we consider these things, we use a final formula to calculate how long it will take to recover our costs.

   Total Cost of the Upgrade or Repair / New Money Earned (or Money Saved) each Month = # of months to repay the expense.

On items under $1,000, as a general rule of thumb, if you can recover the cost in 12 to 18 months then the money is well spent.

In the case of the blinds, the tenants wouldn’t pay more rent just to have blinds. Instead we agreed to pay for dry cleaning the curtains which will be less than $100. There’s no direct return on this – but the tenants wanted the “dirty curtains” replaced so this will keep them happy and it’s not a large expense – especially given that the tenants have been long term.

For the toilet replacement request, we decided that getting rid of the grungy old toilet will not get us higher rent, but it will make it easier to attract and keep good tenants. And, if we replace it now, our tenant’s father (an experienced plumber) will install it for free. Finally, we’re replacing a water guzzler with a low flush model (est. water savings of $10/month) that will qualify for a $75 water conservation rebate from the City of Toronto. The formula of benefits looks like this:

    $250 – $75 rebate = $175 Cost of the Toilet

    $175 / $10/month water savings = 17 months to pay off (PLUS we save $80 on installation).

The cost savings plus the added benefits of saving installation costs made it a very appealing use of our cash. Just remember – real estate investing is a business and you need to get a return on any money you spent – even if that return is simply in cost savings!

If you are managing a property yourself there’s some great books out there to help you. Two books definitely worth checking out are:
Property Management for Dummies

Property Management Kit For Dummies

Ultimate Landlord Handbook for dealing with tenants and toilets

The CompleteLandlord.com Ultimate Landlord Handbook (and we’re pleased to be hosting William Lederer in a teleseminar in June – sign up for our real estate investing newsletter for details!)

Also, some websites worth checking out to learn how to do some of the basic maintenance things:

    *http://www.thefunplace.com/house/home/
*http://allabouthome.com/
*http://www.ehow.com/videos.html
*http://www.expertvillage.com/video/51_fix-leaky-faucet.htm

Finally, here’s a blog post I wrote last year about the difference you can make with some cheap hardware changes, paint and a bit of elbow grease.

http://revnyou.wordpress.com/2008/10/16/real-estate-renovations/

I know that’s a lot of information to digest and a substantial list of resources, but your monthly cash flow is dependent on you maximizing your rental revenue and minimizing your expenses – so this is pretty important stuff to know!

Published April 17th, 2009

Five Ways to Protect Yourself from a Bad Property Manager

We’re not too proud to say we made gigantic mistakes when we hired property managers for our Toronto and Niagara Falls properties. Our biggest errors happened before we even bought the properties, but we continued to make them until one day Dave was reading his name in the paper, calling him “an absentee landlord of a local crack house”, and we were making the discovery that our other property manager was robbing rent money from us.

When we realized what had happened in both situations we really felt stupid. And, financially both situations were painful. In fact, five years later, we’re still dealing with problems that arose because of the bad Niagara Falls property manager.

Mistake Number One: Dave bought (I take no responsibility for what he did with the two Niagara Falls properties) without making sure he could hire a reputable management company. Living two hours away, it was impossible for him to manage the property and he had to hire the only person that would take it on.

Avoid this mistake: Before you buy a property, make sure you are able to hire a good property management firm. There are some properties that good property managers will not manage. And if they won’t manage them, there’s a good chance they are more work then they are worth.

Mistake Number Two: When we hired the property manager for our Toronto property, we focused our research on finding the best priced manager. We glanced at references, made sure the company was registered with the better business bureau and that was about it. We were just anxious to not have to deal with the tenants that were fighting and calling us 20 times a day.

Avoid this mistake: Research your potential property manager obsessively. When you’ve found a firm that you think you’d like to hire, get references and find out what other properties they manage. Drive by those properties and see how well they are maintained. Take a walk around and hope to bump into a tenant. See if the tenant is happy with the property management company. And definitely call a few of the owners of these properties the company manages and find out if they would recommend the company.

Mistake Number Three: Once we hired the property manager in Toronto, we washed our hands of it. Grateful not to be dealing with the tenants fighting, we happily stopped thinking about it.

Avoid this mistake: To start with, frequently contact your property management company. And, once in awhile check in with your tenants. Let the property manager know you are keeping in touch with the tenants and checking the property yourself on occasion. Ensuring the property manager knows you’re involved and that he’s accountable will keep him on his toes.

Mistake Number Four: Ignoring a unit that is always vacant. In Niagara Falls there was one unit we never collected rent for. When Dave checked on it, it seemed someone was living there. Turns out the property manager was letting a buddy crash there for free. This buddy attracted working girls and drugs to the building with a greater frequency than the other tenants. So not only was he freeloading, he was bringing the property down with him.

Avoid this mistake: If there is one unit that always seems to be vacant, check on it. Visit the unit or have someone else visit for you. Confirm that it is vacant. If someone is living there, you want to find out why you aren’t getting rent for it. And if it is really vacant, you need to see it yourself to find out why and fix the problem.

Mistake Number Five: While we never did prove it, we’re certain that the same manager that robbed rent money from us (See our story on what happened) also charged us for repairs to the property that never were done. Anything to scam a few extra bucks from the unsuspecting owners.

Avoid this mistake: If you are being charged for snow removal, check the weather history and make sure it actually snowed that day. If you are being charged for repairs, get receipts or photographs of the repairs. One tip that David Lindahl had in his book “Emerging Real Estate Markets” was to have the management company take a picture of the repair with the local newspaper next to it. This way he has proof of the date, and he can see what the repair actually was. It prevents being charged for the same repair twice.

We’ve learned a healthy dose of paranoia goes a long ways. So trust your instincts, but check them too. A few extra phone calls and a few extra steps here and there can save you thousands of dollars a year.

Published April 5, 2008


April 21st, 2008 UPDATE

After we published this article, we received an email from our Nanaimo property manager. He had a great suggestion regarding our advice to check in with your tenants to ensure your property manager is doing what you hired them to do:

I caution all new clients not to contact their tenants direct under any circumstances! I have many tales of woe on this and not one where there was a benefit. The few that disregarded my advice were quick to ask me how to get out of the problems contacting the tenants had created.

The property manager is the middleman and frequently the “no” man. If the tenant has the owner’s contact info they will not take no for an answer. (Then it becomes a “he said, she said” game.) It is amazing what a tenant or an owner thinks the other promised and I have no way to guess the real story which may be somewhere in between. Why open up that can of worms?

I suggest making an appointment to view the home with the three parties in attendance. You get to know each other and the property but keep your comments to the weather. The meeting is warm and fuzzy.

When we received LW’s email, all of the memories of a disgruntled tenant that found Dave’s phone number through information came rushing back to us. Being in B.C. and three hours behind Ontario’s time zone where the tenant lived, we found ourselves getting really unpleasant 5am wake up calls on many mornings. We really like LW’s suggestion, and believe that a meeting with all three parties in attendance would keep the property manager in the middle, where they should be, while providing an owner with the necessary reassurance that the property manager is doing the job they’ve been hired to do.

So thank you LW for your great feedback. Keep it coming!

 

We were robbed by our Property Manager

girl pointing at robber

Reasons to find the best property manager money can buy

We were taken for a ride by a property manager we had in Toronto. His services were cheap (5% of the rent and no charge for new tenants except advertising costs). Well, cheap, if you don’t count the fact that he was stealing rent money from us!

Before hiring him to manage our tri-plex in Toronto, I researched him a bit and learned that he was a Mom & Pop-type shop, but I didn’t check references or dig much deeper than that. His scam? He collected $950/month from our tenants but only told us we were getting $890!

The extra $60 was likely hitting his back pocket. We are sure he was taking a cut from our other two units as well. However, we were never able to prove that. The only reason we caught onto his scam was because we moved into the house and the tenants started paying us the rent instead of him. Imagine our surprise when the cheque was for $950, and we were expecting $890!

Looking back, we could have easily protected ourselves. Now, we want to help you prevent it. Investigate your property manager before hiring him/her (as per article 2 above). After hiring the property manager, we suggest you do the following:

  • When ads are placed for your unit(s), get copies of the ads. Also, ask where the ads are being placed and check for the ads yourself (looking back, I had noticed an ad for our unit for $50 more than we had agreed to rent it for. I wrote him to change it, and he said he would, but now I think it was a red flag that I should have recognized).
  • Ask for copies of the signed leases.
  • Ask for proof of expenses incurred (always get receipts, but for larger repairs or purchases get pictures or visit the property yourself).

This may not save you completely, but had we been able to get copies of the leases or asked to see the ads, our property manager would have had a harder time stealing from us. We are getting ready to hire a new property manager for our Toronto property, and we can assure you that we won’t be just grabbing the cheapest man on the block, and we definitely will be keeping a much closer eye on the rent and the expenses.

Getting your hands dirty

by Dave Peniuk & Julie Broad

Are you ready to clean, make repairs, place ads in the paper, screen tenants and handle emergencies? If you aren’t, then we hope you have hired a competent property manager for your new investment property. If you decided to save the cash, then you should be prepared to do any (and all) of the following:

  • Clean the property of clutter and maintain the outdoor areas of the property while occupied. This includes snow removal in the winter and lawn maintenance in the summer. When vacant, you will likely have to get in there and clean it yourself (or hire someone) to make it more presentable.
  • Repairs and maintenance (from small things like changing a lightbulb or unclogging a toilet to bigger things like painting or electrical work).
  • Determine the market value of rent in order to advertise the units (check comparable houses/units in the area by checking online or local listings).
  • Determine best places to advertise and place the ads for your rental units (front lawn, local university, paper, online, etc.).
  • Show the property, take applications and screen potential tenants.
  • Collect rent, and deal with problem tenants (giving notices, working with the local government tenancy office, evicting).

There is a lot of work involved in managing a property. Often, the work involved (and any problems) are unexpected and happen at inconvenient times.

The Investor’s Saviour: A Good Property Manager

by Dave Peniuk

A good, reputable, hands on property manager really is what makes property investing enjoyable. We haven’t been so lucky with all of our property managers, but thankfully, in Nanaimo we have one. Lindsay Widsten is one of those property managers that makes investing almost painless. He keeps our tenants happy, provides us with monthly statements, only contacts us when necessary and has earned our trust completely. In fact, he is so good, that we often forget we even have the four properties in Nanaimo!

Before you choose your property manager, it’s a good idea to take some precautionary steps, including:

1. Check the Better Business Bureau;
2. Contact associations like ROMSBC, GTAA etc. and ask for a recommendation, or if they know the property manager you are considering;
3. Ask if s/he is licensed, and with who (get details);
4. Ask for 2 or 3 references from your property manager and give them a call;
5. Drive by a couple of the properties currently managed by the property manager;
6. Ask friends and family for recommendations.

Do your homework. Hiring the wrong property manager can cause you a lot of grief. But hiring a good one, can save you time, money, and stress!

Published December 17, 2006

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