What Marketing Is, Why You Might Care, and How It Affects Renting Property

The following is from the book Get It Rented, available on Amazon.Copyright 2017 Cain Publications, Inc.

The Census Bureau published The Property Owners and Managers Survey in 1996, the latest reliable and comprehensive figures I can find, in which it analyzed rental owners. The study found that “Overall, 58 percent of multifamily properties made a profit or broke even. About 27 percent had a loss, and for 16 percent the owners did not know whether they made or lost money. About 58 percent of small and medium size properties had a profit or broke even, compared to 51 percent of large properties.” Think of that; just over half of multifamily properties did not lose money. Notice the figures are for making a profit or breaking even. We can deduce from that that fewer than half of the rental owners made an actual profit. But a telling figure is that 16 percent of owners had no clue if they made any money or not (and they’re in business?).

What are they doing wrong? Why aren’t all those rental owners ahead of the game? One of the reasons is sloppy, indifferent or NO marketing. After all, tenants are going to rent from someone, so why aren’t they renting from those landlords? It has to do with marketing. Much of marketing begins in the owner’s brain. So many rental owners think they only have to think about marketing when they have or are about to have a vacancy. Then it’s too late. They end up like every other landlord who can’t figure out what to do to get that property rented. They don’t know why the phone never rings and why nobody wants to see their property. Or just as bad, they can’t figure out why everyone who calls shouldn’t be able to even rent a Barbie Playhouse.

Here’s how to adjust your thinking. If the other rental owners aren’t paying attention, all the better for you. You will get the edge that could mean that your properties make a profit every year, your bank account bulges, and you will be able to retire in comfort. It begins with marketing.

Marketing is everywhere and we can learn things that work for our rental properties by watching not just how the pros do it but also what other techniques can be even more effective. Everyone buys (or rents) for his or her own reasons, not ours. So in order to be effective, we need to appeal to as many of those reasons as we can to hit the bull’s-eye of why a particular person buys.

So You Want to Be a Landlord

Part Three

The Advantages of Being a Landlord

It’s a Hands-on Investment

If you send your money off to invest in the stock market or bonds in one form or another, directly buying stocks or through mutual funds, that money is out of your control.  Companies can and do make stupid decisions that trash their stocks and run them into bankruptcy.  Do that and too bad for the investors.  As we have seen in the last few years, the entire market has nose-dived, leaving all kinds of investors wondering where their money went.

Because it is a hands-on investment, with rental property, we can largely avoid the downs through buying smart and ensuring that our rents keep up with the market.

Buying Smart

Along with hands-on investment goes the idea of keeping up with the real estate market.  That means we pay attention to the rents and do regular rent surveys.  But in addition, we also pay attention to where the good real estate investment deals are.

By doing the math, we can spot properties that will make us money from day one.  The rents will cover our buying costs and operating expenses and leave some left over for our profits.

But we have to think about it. We have to take real interest in the real estate in our communities so we can spot an terrific investment immediately and be ready to act to snatch it up before another cagey landlord does.

The Tax Advantages Are Great

Since rental property ownership is a business, we get to deduct all kinds of things we don’t get to for our own homes.  We get to depreciate the improvements. We get to deduct everything we spend on the property as expenses, taxes, insurance, repairs, mileage, management fees, and just about anything else you can think of.

When I first invested in rental property some 30 years ago, I went from having to borrow money to pay my income taxes to getting a refund.

You Get to Choose Your Customers

If you owned a retail store, you are mostly stuck with whomever walks through the door.  With rental property, you can slam the door in the face of bad customers by using careful screening techniques. Bad tenants leave a trail that is relatively easy to follow. 

As I pointed out in a previous tip, some 95 percent of tenants are good.  They pay the rent on time, are good neighbors, take care of their homes and are generally nice people.  We can encourage those tenants and discourage the bad ones with simple advertising techniques that explain that we carefully screen applicants.

By using wording such as “In order to keep our properties great places to live, we carefully screen our applicants,” we send a message to bad tenants that they need not apply and to good tenants that their homes will be pleasant places to live, assuming they rent from us.

You Can Think Like a Professional

Thinking like a professional real estate investor is the important first step in being successful in this business.  Professional real estate investors have a set priority in the way they think. 

First, they honor their investments.  They worked hard to obtain them and they treat them with honor.  That means they care about them, they never neglect them, and they pay meticulous attention to how those investments are doing.  They don’t just hope that everything will be all right; they make sure it will be.  They leave nothing to chance. They can tell how their properties are doing anytime someone asks.

Second, they value their good customers.  Those are the good tenants they selected to live in their properties.

Third, they look for ways to make their investments even more profitable.  That means looking to make sure the neighborhoods where they own real estate don’t become drug and crime centers.  They work with local government and neighborhood associations to ensure their neighborhoods remain great places to live.

They pay attention.  They expect to be successful. They play the real estate investing game to win, not just to survive.

That’s how you must think if you are going to be a real estate investing success.

So You Want to Be a Landlord

Part 2


Tenant Selection

A bad tenant is what can cost a landlord the most money. Some 95 percent of tenants are good. They pay the rent on time, take care of their homes, and are good neighbors. But bad tenants have a knack for sniffing out landlords who are less than diligent or less than expert in tenant selection. It’s almost as if they have a built-in radar for tracking down landlords who don’t screen well. Tenant selection is a job that is easy to learn but hard to practice because bad tenants are often people who are expert at weaseling their ways in to rental properties owned by landlords who decide to rent to a tenant while they are listening to him and get snookered by a sob story.

Government Regulations

The bureaucrats in government seem to have it in for landlords. They pass laws specially aimed at rental property owners and apparently consider landlords fair game for any and all regulations and enforcement activities. It is all but impossible to know all the laws that affect rental property. They are hidden inside federal, state and local laws and regulations and come out to destroy landlords’ businesses when the landlords least expect them.
In addition, often the property taxes on rental properties are higher than those on owner-occupied properties and, in addition, may be subject to licensing fees and inspections from city workers, all at a cost to the landlord.


Especially dangerous is the Fair Housing Act. Without knowing it, the uneducated landlord can fall prey to a Fair Housing violation. Some of the seemingly most innocent misstatements or comments can result in a complaint that can cost upwards of $5,000 even if the landlord is found to be totally blameless. Imagine the cost if a landlord actually broke the Fair Housing law.

Vacancies

You are lucky if you get a long-term tenant, one who stays for several years. Normally, though, figure about one vacancy per unit per year. If you own a single-family property, that means that once a year you have to find a new tenant and have a 100 percent vacancy rate. Figure the cost of each vacancy is at least one month’s rent. Think about it. You will have to get the property ready to rent, the cost of which can vary from simple cleaning and polishing to painting and re-carpeting to fixing major damage.
That’s not to mention your marketing costs. Of course, ads on Craigslist are free and often are successful, but you still have to write them and answer the phone calls. Then, there’s the time involved driving over to the property to show it and waiting for someone who may or may not show up.
Prepare to be hatedHave you ever noticed how every time a rental owner is portrayed on a television program, he or she is the epitome of either disgust or evil? How that came about is something of a mystery, but rest assured that many people suck right in to that belief and resent the fact that landlords saved their money, invested it in real estate and actually want to turn a profit on that investment. Even some of your “friends” might turn against you. Or not.


Property Managers

The best way to avoid many of those hassles is to hire a property management company to take care of your property. That can be an excellent idea. It also can result in your losing your entire investment.
Not all property managers are diligent and look out for their clients’ interests. Too many are sloppy, lazy, incompetent, underfunded, mismanaged and generally a bad idea. You need to interview property managers just as you would any contractor.
In addition, figure that the property manager is going to take 10 percent right off the top, thus cutting into your expected profits.
Do you know all these pitfalls? Have you thought them through thoroughly and how they can affect your business? Have you decided that you can deal with each of them successfully? If so, you will want to read next week’s installment. In that, I’ll discuss why and how owning rental property can be a good idea and a great investment.


Part 3 Next Week

So You Want to Be a Landlord

Part One

Somebody, maybe several people, who say that owning rental property is a great idea and will always provide you with excellent profits, advise that now is the time to become a landlord.  Maybe and maybe not.  It largely depends on you.  I’ll explain why.

This is the first of a two-part series about real estate investing and what it entails, its pitfalls and promises.

First, let me try to talk you out of buying rental property. Think long and hard before you buy your first piece of rental property. And after you think long and hard and decide to do it, think long and hard again. You have any doubts at all after all that, read the following.

The Pitfalls

It’s Work. 

I don’t care what the purveyors of the magic of landlording told you.  Owning and managing rental property is work.  It cannot be passive income unless you hire a property manager, but more about that later.

You will have invested considerable money and time in a acquiring and owning rental property.  You know how much money you have to put into it to make a property yours, or yours and the lender’s. Then, you have to get it ready to rent.  That can involve anything from simple cleaning and tidying up to painting and carpeting to a major remodel or new roof and heating system.  That done and the property is rented, it’s still work.

Things break.  And things traditionally break when you are not planning to have them break, usually the Friday night before a holiday weekend as you are getting ready to head out the door for a long weekend.  Maybe you can get a repairman to come out and fix it so you don’t have to.  Of course, it will be twice the price and you will have to meet him at the property.

Of course, you find out about the broken stuff with a phone call.  If you like phone calls, great.  That is one of the prime requirements for being a landlord.  But, be prepared to gradually develop a distaste for the telephone ringing even if talking on the phone is one of your favorite pastimes. Real estate is full of surprises; there are no good surprises in real estate, and every call from a tenant will be a surprise.

Buying Stupid

The idea is that the rents you receive will not only cover the mortgage payments and the taxes and insurance, but will also net you money every month.  If you buy stupid, that will not happen.  For whatever reason, many prospective rental property investors don’t or won’t use a calculator.  If the rent from the property will not at least break even, you will have to feed it every month.  That means you take money out of your bank account to make up the difference between the rental income and what you have to pay out.  I know, you get this huge tax break at the end of the year.  Many times it’s even enough to pay you back for the money you had to use to feed the property. And we haven’t even looked at vacancies.  See that discussion later.

Three Easy Steps to a Bad Tenant

By Robert L. Cain, Copyright 2020 Cain Publications, Inc.

It is easy to rent to a bad tenant.  That is partly because bad tenants make it easy and partly because of what landlords do and don’t do.

You know who they are: they don’t pay rent; they bother or even terrorize neighbors; and they keep their “home” so it looks like a pig sty (with apologies to pigs). 

Here we will look at three things landlords do and don’t do that allow bad tenants to slither into their properties.

Step One: Let your property look like a slum

Bad tenants are attracted to properties that fit their self image.  These are properties that could use considerable upkeep and repair. 

Landlords of slum-looking properties emanate the message that they don’t care.  They don’t care about their investment, and by parity of reasoning, don’t care who lives in their properties. 

It could just be that since the landlord has had so many bad tenants over the years, he or she hasn’t been able to maintain the property with little or no rent coming in.  It could also be a result of rent control, which has not allowed the landlord to raise the rent sufficiently to keep up with maintenance.

Regardless of the reason, a seedy-looking property attracts applicants who resemble it.

But there’s more. Bad tenants will move into a property that needs work, because they are “able and eager” to finish all that work that will get the property ready to rent.  Of course, they will never do any of that work and will decide after a few months that they shouldn’t have to pay any rent for a “dump like this.” They will tell the judge at eviction court that you never fixed all that stuff you “promised to fix” and even have the pictures to prove it.

Step Two: Decide to rent while you are listening to them

These folks are so pitiful that, and have such hard luck stories it is enough to make the most stony-hearted property manager’s heart bleed. They have a knack for going to work for the most unreasonable, rotten, cruel, mean, obnoxious bosses on earth, and for companies who are about to lay people off.

They also have a knack for getting into accidents and getting sick, which runs up big doctor bills that they have to pay so they can’t pay the rent. And those unreasonable, rotten, cruel, mean, obnoxious landlords they always rent from get mad when they don’t pay the rent and evict them. “You’re not like that, are you?”

Once you’ve been sucked into their universe of bad luck it rubs off on you. They don’t pay any rent to you, either. And by golly, do they have some great excuses. They’ll take this new set of stories to the next landlord, after you evict them.

The stories they have cooked up are sometimes true works of art.  They are so imaginative and practiced that they can have you actually believing that none of these terrible things that happened to them were their fault at all.

Step Three: Be Desperate

All reason goes out the window when all you can think about is where the mortgage payment is going to come from this month.  If you only had a tenant, the mortgage would be paid.  When the sob story, or the applicant who “has to find a place to live today” (and has money) shows up, you can see yourself writing the mortgage check. “Phew, that was close,” you say to yourself, “I almost had to take it out of my pocket.”

Yes, it’s easy to rent to a bad tenant if you follow those three easy steps.  Let your property go to seed, get sucked into their dark, down-spiraling world, and believe that any tenant is better than no tenant.

How to Put People at Ease

By Robert L. Cain, Copyright 2020 Cain Publications, Inc.

Putting people at ease is a basic step in getting people to react favorably toward you, says Dr. Arnold Lazarus, a psychologist at Rutgers University. He offers these suggestions:

1.Let people hear your voice. Don’t just nod. The sound of the voice is like a calling card or introduction.
2.Avoid talking too much or too little. If you tend to be too quiet, use more words. If you are a compulsive talker, try to summarize. Others often like to hold the floor themselves.
3.Use the word “I” in your conversations. You are much less of a mystery when you disclose something about yourself.
4.Look for something you can comment on positively. Pick something that you genuinely like about the other person and point it out to him or her.
5.Be able to laugh at yourself. If you tell a story in which you do not come out in a particularly good light, you will immediately see other people warm up to you.
6.Let your face express your feelings. If it is a mask, you are not going to put anybody else at ease.
7.Make eye contact often with the other person. By looking up at the ceiling or down at the floor while speaking, you make your listener feel ill at ease.

Screening Techniques

How to Qualify Prospects by Phone

As soon as you pick up the phone for an ad call, you can begin qualifying a prospective tenant. Even before you make an appointment to show the property, you can pretty well have determined if this person is someone whom you would want to rent your property or who would want to rent it.

You qualify by asking questions. There is no particular order to ask them in, the course of your conversation will determine that. The questions begin with the words “who,” “what,” “when,” “where,” and “why.” Just like a good newspaper reporter, you need an answer to each of these questions before you show the property.

“Who is calling?”

You need their name and phone number. If they will not give you their name, you have reason to be suspicious about a couple of things. First, are they seriously looking for a new place to live, are they just testing the market, or are they Fair Housing testers? It is a good idea to get their phone number so if you are disconnected for some reason, you can call them back. It is also the first step in verifying the information they might give you on a rental application. If the phone number they give you is not listed to them, yet they give you an address which they say is their current one, you have reason for concern.

“What property are you calling about?”

Studies have shown that people call on ads to eliminate the property. But your caller also may not be looking for what you have advertised. For example, yours may be a three-bedroom unit, while they are looking for a two-bedroom. They might be calling because they want help locating what they are looking for. Don’t brush them off! This could be a great opportunity for you to feed a lead to another landlord who has such a unit available. It could result in a referral fee. You also might have a unit coming up soon that would fit the caller’s needs.

“When do you need to move?”

At the end of the month? In three months? Tonight? The answer tells you if their needs match yours, as to availability and timing. Some answers might also beg another question, such as “why are you moving?”

“Where do you want to live?”

It may be that your unit does not meet their location needs. If that is the case, you could have another referral opportunity.

“Why are you moving?”

When you asked when they needed to move and they told you “right away,” you have good reason to ask further. The word “eviction” springs to mind with an answer like that. They could be moving in from out of town, a perfectly legitimate answer, assuming it is the truth. If they are evasive or inconclusive when they answer, ask them point blank, “are you being evicted?” Yes, it is harsh; but yes, it is also your money and your property, both of which you will sacrifice on the altar of “too-much-in-a-hurry,” or “too-little-gumption” if you fail to follow up and you rent to them after they were evicted because they didn’t pay the rent or wouldn’t follow the rules.

IMPORTANT!

Write out these questions. Do not ad lib anything when you answer an ad call. Check them off as you ask them. The information you get on the initial phone call could decide whether you let a bad tenant get to first base with you, or whether you miss out on an outstanding tenant.

Following Up

by Robert L. Cain. Copyright 2020 Cain Publications, Inc.

Sometimes prospective tenants just can’t make up their minds. When they look at the unit they get excited and say things such as, “oh, this is so cute,” and they start mentally placing furniture and planning where little Johnny’s room would be. Then they go away. And you don’t hear back from them. Here you thought you had a real prospect for your rental and they don’t call back. 

What happened? Did they rent another place? Did they decide not to move after all? Or, are they just unable to make up their minds? It could well be the last one. Lots of people just can’t decide until they have someone who helps them decide or until they’re forced into making a decision by outside circumstances, such as their moving deadline being only a few days off.

Simply because they didn’t get around to doing anything about your rental property,  they end up renting a place they didn’t really want, kicking themselves for missing out on that cute place they looked at (yours). Assuming these were excellent tenants, you missed out, too. You might have ended up taking an applicant who was not as good a tenant as these folks are.

How do you make sure these folks rent from you? Follow up. Following up is the  most important technique any salesperson can use. And you are a salesperson when you are renting a unit. Persistence can even turn a sloppy or indifferent sales presentation into success.

Basic follow up is easy. All it takes is a telephone and a few minutes. Doing a really bang-up job of it takes a little more preparation, though. Here’s how it works:

1. You have to get the name, address, phone number, and email of everyone who looks at your units. If you don’t do that, you can’t follow up.

2. Use an “Inquiry Form.” I have one in my book Get It Rented. On that you write all their contact information and everything they expressed an interest in about the unit. For example, they might have mentioned the fact that it was on a bus line, was in a good school district, or had a large garage.

3. Immediately mail or email them a thank-you note for looking at the property

4. Now call them. When you call them you have something to talk about. “I was calling to touch bases with you about the apartment you looked at at 123 Main St. last weekend. I remember you liked the large garage. What have you decided to do about moving?”  Always ask question that cannot be answered yes or no. So instead of asking “have you decided about whether you are interested in renting my apartment,” ask “what have you decided. . .” or some other question that begins with who, what, when, where, why or how.

5. Your first follow up call should be no more than three days after they looked at the unit. If they’re still waffling, call them back a week after they looked. This time say something like, “I was just following up again. I’ve had several people who looked at the apartment who seemed kind of interested. And I don’t want you to miss out on the chance to get your application in ahead of those other folks.”

Notice that you make no offer to rent the to them, only to accept their application. After all, bad tenants are experts at looking like the nicest people you’d ever want to meet.

When you are renting a unit you need to apply as many sales techniques as are appropriate; and follow up is one of the most important and effective you can use. Following up lets people know that you are eager to do business and that you have follow-through. When you take the initiative to get in touch with them, you have made it easier for them to do business with you.

When Landlords Are Liable (and when they aren’t)

Copyright 2020 Cain Publications, Inc.

by Robert L. Cain
Courts’ “reasoning” sometimes defies belief. All too often landlords are found liable for crimes that occur and hazards that exist on their properties. Now we have to assume that courts will rule on the side of the tenant or another injured party, given any possible rationalization to do so. Lawyers also sue the party most likely to be able to pay them. That often means the landlord.

Just as often, though, is that landlords have some liability. One pattern etched in every lawyer’s and judge’s mind is you are liable when you know or should have known about a dangerous situation and do nothing or too little about it.

Here are the patterns you will want to etch in your mind to protect youself against faulty reasoning by courts and judges. It begins with a consciousness of what is most important.

If a tenant calls you about any situation that might remotely be considered dangerous, fix it immediately. The most terrifying call is the one where he says, “I don’t think this is very serious, but. . . .” Don’t finish your dinner, postpone the flight to Hawaii on your cell phone as you drive, and push the speed limit on your way to the property to see to it. If a tenant says something is “not serious,” chances are excellent that the building will collapse with the next strong wind.

Even without tenant warnings, when you do quarterly property inspections, here are things you will want to see to immediately.

Loose handrails
Broken steps
Locks to outside doors that don’t work
Insecure outside doors
Insecure windows that can be reached from the ground
Loose things overhead that could fall at any moment
Loose electrical wires that spark, smoke and blow fuses or circuit breakers
Other fire hazards

Those are situations where if you knew about a problem and did not correct it, you can count on paying big bucks to lawyers and to the winner of the lawsuit in a judgment. The cost will skyrocket if one of these situations turns damaging or deadly. Just as important, be sure it gets done right. Doing a poor job is worse than none at all.

If someone should logically expect that a repair or replacement has been done properly, it had better be. When you repair loose steps, people expect that they should be able to use them without extraordinary care. If you put what look to be secure locks in an outside door, people expect that they will work reasonably well to keep an intruder from simply picking the lock.

In fact, you undertake a greater responsibility once you repair a potential problem than if had you done absolutely nothing. In the case of your doing nothing, the people will instinctively take more care. They will be careful going up stairs and block the outside doors to their units. Fool them into thinking they are safe when they are not and you will pay.

Pay attention to things right in front of you. Wiggle, twist, test, stomp and push on any and everything that shouldn’t wiggle, twist, fail a test, creak when stomped on or give when pushed. Repair or get repaired all of them that do. Take the opportunity of defying reason out of the hands of judges and courts and at the same time protect your properties and your tenants.

Landlords Can Always Afford to Wait

Copyright 2020 Cain Publications, Inc.
by Robert L. Cain

We, as landlords, cannot afford to wait for the rent. Trouble is, many tenants believe we can. Enough tenants to populate a large city believe we get to keep as our own all the money they pay us in rent. We don’t have mortgages, insurance, taxes, maintenance or management expenses to pay. They have visions of us rolling in dough, and like Scrooge McDuck, having a huge vault where we keep our ill-gotten gains, and daily going in to roll around and play in our money—the money we snatched from them.

Some of our tenants wake up on the 22nd of the month and find themselves in the predicament of having more month than money and having to choose which bills to pay. How do they go about choosing who gets paid this month and who gets to wait? They use two criteria to decide.

One, who is going to hassle them. Two, who will report their nonpayment to a credit reporting agency. So our tenant sets his pile of bills on the table and goes through them.

Electric bill: “I paid it last month, they won’t call me and bug me, and they never report it to a credit-reporting agency.”

Visa bill: “Whoa! If you don’t pay them, they call you, they hassle you, and they send notices to credit reporting agencies.”

Phone bill: “I didn’t pay them last month, so I guess they have to get paid now. They’ll shut you off if you don’t pay. At least they don’t report you.”

Cable bill: “They won’t report you, but they will cut you off. If they cut me off, I can’t watch baseball on four channels at the same time. Gotta pay them.”

Car payment: “Gotta pay that one, too. If I don’t, they’ll come and get my wheels, and report it to a credit agency.”

THE RENT (landlord one): “I have such a nice understanding landlord. He won’t hassle me. I can call him and tell him I had some emergency. Let’s see, what will it be? Uh, kids in the hospital is always a good one. He’ll let me slide a couple of weeks, then I can call back and get him for another couple of weeks. Best part is he never reports me to a credit agency. That’s a big bill, too, I can pay a bunch of other ones if I don’t pay the rent. Besides, the landlord’s rich, anyway, he can afford to wait. I think the cell phone company would like to get paid before they cut me off.”

That, or something really similar, is the thinking that goes on in the mind of a tenant who has more month than money. Why do tenants do that to landlords? It’s because we don’t make sure they know from the beginning that paying the rent comes first, period.

Imagine the difference with a landlord who takes a different attitude.

THE RENT (landlord two): “I’d better get that check written right now. It’s the 29th and the rent is due on the first. If it doesn’t get there on the first, that jerk is going to call me. Besides, I won’t get the prompt-payment discount. Then, he’ll bug me some more. On the 25th of next month there’ll be a notice posted on my door reminding me of the importance of paying the rent on time. I remember one month when I tried to not pay the rent, he called reported me to that RealChek company, and they reported it to a credit agency. That ended up costing me a bunch when I had to pay a higher interest rate on the car I bought because of my lower credit score. Gee, maybe I should hand deliver the check.”

From the beginning landlord two made it clear that the rent was the most important bill. Many landlords use a move-in checklist so they don’t forget anything. One checklist item explains to the new tenant that the rent is due on the first and late on the second. We need to make clear that we will always collect late fees from the tenant or deduct the late fees from the security deposit, after which the tenant will have to make up the deficit in the security deposit. We need to make clear that we begin eviction proceedings the first day they are legally allowed. Finally, we need to make clear that if the tenant pays the rent late more than three times in a year, we will terminate the tenancy or will not renew the lease.

Tenants can think whatever they want about all landlords being rich. They can imagine mythical vaults crammed full of money. There is no cure for this particular piece of ignorance that we, as landlords, can provide. Regardless of the mistaken notions of tenants, we still need to make clear that prompt rent payment is vital. If we don’t make that clear, if we don’t stress the importance of on-time rent payments, if we don’t believe with all our hearts and minds it’s important, neither will our tenants.