Author: bobcain45

How does a city manage to lose 11,521 rental units in a year? When you look at the city of Seattle, you understand how. The latest issue of Current, the publication of the Rental Housing Association of  Washington suggests it is because of the “City Council’s repeated passage of ordinances that further increase the costs, risks, and onerous burdens on housing providers.” Typically, Current reports, these homes “become owner-occupied rather than continuing as a rental.”

In case you haven’t heard about them, here are some of the onerous regulations instituted by the Seattle City Council.  Just three of them are those passed in June 2021, the school year eviction ban, which prohibits evictions during the school year; a prohibition of evictions for COVID debt; and mandatory lease renewal that must be offered 60 to 90 days before the lease expires. In addition, they cap move-in fees, pet deposits, and security deposits regardless of the qualifications of the applicant. They have a rental registration and inspection law and a requirement to rent to the “first qualified applicant.”

There’s more, in fact far more, that’s too much to list here. Suffice it to say that it raises the costs of owning and managing rental properties and makes it questionable whether a rental owner can even turn a profit on his or her investment.

The usual suspects think you can do just one thing. How ignorant and arrogant can you be? The effect has been the loss of rental housing in a city that already finds itself with a lack of rental housing, both affordable and market rate.

For more than 20 years, I have advised rental owners to sell their rental properties to owner-occupants in areas where government makes investing in real estate unprofitable and more difficult than in areas that welcome rental investment. Now Seattle rental owners seem to have had enough, and are getting the idea, and bailing out of the Seattle rental market. You have to wonder how their City Council will react. Figure, considering their past behavior, it will be more of the same driving more of “those evil landlords” to cities that welcome their business.

This may be the most powerful tool in your box, and one that other landlords would never think of using but sets you head and shoulders apart from competing landlords.

What do you say to prospective tenants to keep them from even thinking about renting from another landlord? Maybe nothing will help if your property doesn’t fit their needs. But how many do you lose to other landlords? How many prime candidates say “we need to think about it” and end up being gobbled up by another rental property owner?

You can chop that number way down with the preemptive marketing strike.

You can immediately put all other landlords on the defensive, without their even knowing they have been preempted, if you warn prospective tenants that there are some vital considerations that they need to think about before they make their decision about a place to live.

How about this one. Did you know that most landlords get no training in rental property management at all? It’s true. The vast majority of them have never even heard of an apartment, landlord, or rental owners association, much less attended a class or a meeting. But you have. Why is that important? It means that those other landlords don’t know about the latest trends, techniques and legal issues in property management. Membership enables you to serve your customers, your tenants, better.

So after they have talked to you, what’s one of the things a prospective tenant will ask another landlord? “Do you belong to your local rental owners association?” What will be the answer? “Well, no, I don’t have time.” Or, “what’s that?”

By setting up a preemptive strike you immediately get tenants thinking in the direction you want them to.

Do you know that many landlords don’t respond to repair complaints the same day? So you say, “we respond to repair complaints within eight hours,” (or whatever). The next landlord they talk to will then be forced into the position of answering a question he or she never thought about before. Chances are the answer will be nowhere near as powerful as your preemptive strike because you thought it out first and know what to warn them about.

A couple of others. Did you know that many landlord don’t have a regular maintenance program? That means properties might look a little shabby after a while or things might break in a tenant’s home when preventive maintenance would have prevented it. But you have such a program: as a result your properties are places tenants can be proud to call home.

Did you know that many landlords don’t enforce the rules of the complex consistently? You do because we have found that it makes for a better place to live for all the people who rent from us.

You can probably think of a couple more things you do that you can express in such a way that they will become a preemptive marketing strike. Think of four or five, then use them to warn prospective tenants about the dangers they face renting from just any landlord.

Let’s add one more idea about the preemptive strike. Harry Beckwith in his 1997 book Selling the Invisible (available from Amazon both as an ebook and hardcopy) in the chapter “The Possible Service” writes about taking customer service one step beyond what even your customers ask for or could even think to ask for.

He divides customer service into three historical stages.  Stage One consists of meeting minimum acceptable standards. “Get a basic, acceptably reliable product. Buyers accept this minimal product—the first car, the first VCR , and the first fast-food restaurant—because they desire the unique benefits is offers.  Buyers will accept that good with some bad—typically the fact that bugs aren’t out and the price is high.”  Tenants who don’t expect too much, who are young and living on their own for the first time, many times fall into that category, as well as people who aren’t too particular, or who figure they’re never going to get a great place to live, anyway.

In Stage Two, you start getting competition.  You have lots of that as a rental owner and manager.  “Differentiation of this core product [housing] becomes vital.  Enter the marketers,” continues Beckwith.  “They listen and make refinements the customers ask for: more colors, an ashtray so that drivers can smoke, and later an AM/FM radio.  Answering customer needs is the driving force during stage two of an industry. Stage two is market-driven.” That is rental property now.

“Few companies enter stage three,” writes Beckwith.  “These companies are in the pantheon of the marketing gods—the Disneys, Federal Expresses, and Lexuses.  Disney entered the stage when it created amusement parks that went beyond what customers said they needed—or could ever have imagined.” The surveys companies took had hit dead ends.  Customers no longer could think of what else they wanted, but the companies’ missions became surprising the customer.

Beckwith concludes the chapter by saying, “Create the possible service; don’t just create what the market needs or wants.  Create what it would love.

Some larger apartment complexes work on creating things their residents would love with on-site child care, office services, decorating services, and valet cleaning services.  Smaller rental owners and managers don’t have the size and capability to offer those things.  And for the most part, if you rent single-family homes and small plexes, your tenants don’t want those particular items.  Apartment dwellers many look for “five-star-hotel” amenities, but not single-family-home renters.

That is something to think about and plan for in your business.  How can you surprise your prospective customers, the rental market, with things they would love?  It requires a leap to thinking about what is possible, not just what your customers say they want.  After you do all the things good tenants say they want, what differentiates you from the rest of the good rental owners and managers who have a place to rent?

It would be the unusual rental owner and manager who could come up with Stage Three features and services.  Of course, that doesn’t mean you don’t want to try to think of some.  If you do succeed in creating a great new idea, you will have to take the “good” tenants on a first-come, first-served basis. 

While Stage Three is something to think about, Stage Two is something to do right now.  Do the things that the cream-of-the-crop tenants expect and require, and you will get them.  Many times even Stage Two will be enough to eliminate most of your competition for attracting the top-notch applicants.  Most other rental owners won’t do it.  Think of the preemptive strike you have there!

And so…

That’s how you package yourself.  You think of the things you do well, the things that make you unique, the things that you do that other landlords may do but don’t tell anyone, and you make those selling points of YOU and your business.  It is that simple and that powerful. Get it rented.

By Robert L. Cain, Copyright 2022, Cain Publications, Inc.

“There’s a sucker born every minute,” PT Barnum didn’t say it, and we might be suckers for believing that he did say it. Ryo Mac wrote, “It seems that everyone believes things a little too eagerly, especially if they want to believe it.”  It was likely a banker named David Hannum from Syracuse, New York who actually said it.

The fact that it most likely came from the mouth of a banker provides us an entirely new slant on suckers considering that financial “experts” fool people far more often and more destructively than any circus impresario ever could. 

Some people seem immune from suckerdom. When they try something, they think it through to avoid potential problems. They think critically. People who will fall for about anything lack critical thinking ability, lack financial savvy, lack self-control, and lack the ability to see consequences and alternatives. A black cloud follows them around ready to rain on them every time they try to do anything to help themselves.

People who lack critical thinking often intone the mantra “it’s not fair,” but reflects the fact that they make little or no effort or ability to counteract unfairness. They blame bad luck rather than their own bad decisions and lack of common sense.

One of the biggest financial hits can come when buying property. The Pew Charitable Trusts studied alternative financing, one way suckers can get fooled, and reported that one in five people have at some time used alternative financing and one in fifteen, about 7 million US adults, are using it as you read this. Alternative financing includes land sale contracts, lease-purchase agreements, personal property loans, and seller-financed mortgages. Alternative financing can be an excellent way to finance property. But financial peril lurks for the unwary.

Science News explained in its August 24, 2018, issue. “Nearly a third of young adults in a recent study were found to be ‘financially precarious’ because they had poor financial literacy and lacked money management skills and income stability.” The dream of homeownership is just that for many of them until the opportunity arises for them to buy a property using financing other than from a bank or mortgage lender.

Alternative financing may be their only chance ever to buy a home. Their credit is in the cellar, they owe thousands in credit card debt, they have financed cars beyond their abilities to pay, and get trapped in low-paying jobs. Eluding them are the toys and trinkets of people who have college degrees, well-paying jobs, and critical thinking ability. “It’s not fair those people have them and I don’t,” they say.  Life isn’t fair, but putting oneself in crushing debt won’t make it fairer. What will give them a leg up is growing the ability to think critically, to be able to say “what if” to protect themselves the same way the people who don’t get fooled do.

It may simply be beyond their capabilities to spot a bad deal. They “aren’t good at math,” they believe experts, they get their information from TV news, which tends to reinforce the “not fair” scenarios, and they tend to believe people who, they believe, are smarter than they are. Chances are they aren’t any smarter, just more practiced at the art of deception. The fooled can’t afford or don’t even think to use a lawyer to look at the contract.

Most of the time nothing untoward happens using alternative financing to buy a home. But sometimes it does and usually for the same reason: they don’t read and understand well. The legalese is beyond their reading capabilities and thus the ramifications of agreements they sign. They may believe the people who drew up the contract who tell them what it all means. A vicious circle, they have poor credit, low-paying jobs, lack of financial education, and poor reading and math skills. Bad guys put their feet on their desks offering to “make them a deal.” The suckers born every minute.

They may be stuck buying low-end properties using alternative financing because it’s not worth it for conventional lenders to loan less than a specific amount, maybe $125,000, or on properties with habitability issues such as utility connections, unfinished kitchens and bathrooms, and manufactured homes sitting on rented land.

How do alternative financing contracts backfire? A few get caught in a trap written into the contract of sale that puts them at a disadvantage. For example, the law varying by state, bank-loaned mortgages carry legal requirements. Not so with alternative financing mortgages. Strict legal procedures require that bank-loaned mortgage require some four months to foreclose if the buyer can’t or doesn’t pay. The lender of a seller-financed property might foreclose in a month. Buyer doesn’t pay, seller forecloses and boots the buyer out, who loses everything he or she put into the property, all the principal and interest payments, all the improvements, and the down payment. But a buyer would also lose all that with a bank-financed mortgage. It just takes longer and the buyer may be able to sell the property before the sheriff comes to evict. With alternative financing, good luck. When the 30 days are up, the buyer is out, losing all rights to the property.

Manufactured housing presents another quandary. If the house is in a park and the manufactured housing owner rents the space, no conventional lender will touch it and the buyer must get a personal property loan. Conventional mortgage lenders loan only on fee simple property, that is, property where the buyer also owns the land where the housing sits. Say the park owner sells and the new owner triples the space rent. The buyer can’t pay the higher rent amount, can’t afford to move the house because of the major expense, find another place to put it, and loses everything just as with seller financing. Plus, the personal property loan remains owing. The park owner might offer to pay off the loan for the current balance owed, or the manufactured home buyer might simply default, destroying any credit he or she might have had.

Do alternative financing buyers know any of this? Do they think, as the lender promises, this is standard procedure? There is no such thing as “standard procedure” in a real estate contract.

With little or no financial savvy and critical thinking ability, they simply don’t know how the world works. The result is they are in constant financial trouble. They may be resentful of anyone doing better than they are. They often have collections and bankruptcies.

By Robert L. Cain, Copyright 2022, Cain Publications, Inc.

Fraught with possibilities for fraud is information on the rental application of a gig worker, especially one type of gig worker. With their inability to provide much credible information, it can be difficult for us to be confident about their qualifications. Many exist in a kind of an employment shadow world on the edge of society. But that world grows ever larger Many, possibly the majority, of them are renters.

Zippia Research reports that this segment of the economy grew by 33 percent in 2020, with some 59 million American adults having done gig work that year, amounting to at least 36 percent of the population. According to the research by Zippia Research, “16 percent of US adults earned money through an online gig platform at some point in their lives,” with 9 percent earning gig income in 2020. By 2023, figure 52 percent of American workers will have worked as gig workers.

They contributed $1.21 trillion to the economy in 2020, around 5.7 percent of the US GDP. If overall statistics apply to them, more than 40 percent of them are renters. That’s being conservative because becoming a homeowner with gig income verification presents problems that wage workers and even business owners don’t have. We’ll look at those in a minute.

Who are gig workers? The definition has expanded to include people whom we wouldn’t have thought of as gig workers in the past.  The definition includes of course Uber drivers, Door Dash drivers, etc., but now thrown in the mix are the people we normally think of as freelancers and contract workers such as writers, marketers, engineers, and professional photographers, people legitimately in business with that profession, and not just looking for side income. They present more uncertainty when verifying their rental qualifications.

Many people, especially with inflation running rampant, or wanting to save money maybe to buy a house, take gig jobs to work toward financial goals. They have verifiable work income with the gig money as an added attraction. A little more difficult to screen, they do have verifiable income.

Then there is the shadow world of gig workers whose primary income comes from Uber driving and delivering Door Dash food. It gets tougher to ensure that such an applicant is qualified and has told the truth on about income on an application. Add to that only four of the 10 verification steps might even work for screening them and only one offers even remotely dependable verification.

With a normal rental application, we can look at 10 items as evidence of adequate income.  The applicant may show up with W-2s, 1099s, pay stubs, a letter from an employer, or even an unemployment statement or workers’ comp statement. What a gig worker might have are tax returns, 1099s, a bank statement, and a Social Security statement, the only document that’s difficult to forge.

Since they are not employees, there’s no employer to supply paystubs. The gig worker to keeps track of his or her own income, taxes, and expenses. If a gig worker presents a paystub as evidence of income, look at that as a red flag. A paystub may well have been forged and could fool the unwary landlord.  If a gig worker presents a paystub and says he or she gets one from his “employer,” ask for an explanation from the applicant, but it will in most cases lack credibility. Chances are, we reject them out of hand. Even so, the company the gig worker contracts with may send a monthly statement, something easily forged, as well.

The three items they can present that could work to prove their worthiness to rent are a tax return, 1099s, and a bank statement. Each of those is so easy to forge they are unreliable for evidence. Here’s where we have to adopt the mantra, “doubt everything” and verify everything meticulously.

How then to verify the income entries on a rental application for the three types of gig workers? The first one, the workers who work as freelancers, contractors, artists, and such and whose work provides them with a livable income, is more reliable.  They keep books, have business bank accounts, can provide tax returns, and can show 1099s to show who paid them and how much. They also have business cards and maybe even brochures. Here we can confidently take their income statement as verifiable.  Just check landlord references, look up their business website, and call people they do business with.

The second category of gig worker is just about as easy. These folks have jobs or maybe businesses with verifiable income and just use gig income as extra money, say saving for a down payment. They have W2s, paystubs, and an employer with whom we can verify the information on the rental application. The gig income is a plus and needs to be verified thoroughly only if that income is required for them to income-qualify to rent a property.

The third one, people whose primary income is as an Uber, Door Dash driver, or something similar. Whatever evidence of income they state can only be considered risky.  The rule of thumb with all rental applications is that the person must prove to the landlord’s satisfaction that the application is honest and accurate. It’s not up to us to show it’s false.

First, as with all applicants, they must prove who they are with a driver’s license, passport, or some other form of government identification that can’t be forged. And as with all applicants, they must prove that what they claim as income is true. With it so easy to create phony documents and with so many companies, such as realcheckstubs.com, offering to provide official-looking documents that say whatever their customers want them to say, we need to question every item on the rental application.  Unfortunately, we don’t have any foolproof way to do that because the forgeries can look so real. Sure, look at bank statements, 1099s, and profit and loss statements. But those are so easily forged that we need to look at them with skepticism.  If inclined to rent to the applicant, landlord and personal references that we can verify as accurate are our most efficacious and possibly only line of defense.

With the number of gig workers growing apace, and considering most likely most of them are renters, they will be knocking on our doors trying to get us to rent to them. Should we?

Written for Zip Reports where they do employment and rental screening.

Contact Robert L. Cain at bob@cainpublications.com

By Robert L. Cain, Copyright 2022, Cain Publications, Inc.

We have had problems with my tenants’ refusal/difficulty vacating the rental unit after the lease term has expired. We have told them well in advance that we will not be renewing the lease, but they still will not leave at the designated time. HELP! What do I do to get them out? At this point, isn’t this considered trespassing? How do I get them out? Am I able to lock them out of the dwelling? Thank you for your advice on this matter, Jane Jefferies

Every once in a while landlords have to deal with people who seem to be unable to rent the U-Haul and get their stuff somewhere besides their ex-landlord’s property.  Usually, those who are not wanted have the good sense and grace to move out.  Apparently, these folks have neither good sense nor grace.  You are in a position to make their renting from another landlord extremely difficult by providing an accurate reference when a prospective landlord calls you for a reference. This offense ranks right up there with a midnight move-out owing two months’ rent. 

In the meantime, however, to protect yourself from the court system that consistently comes down on the side of tenants, take some specific steps. It doesn’t matter if the tenants are good, bad, or somewhere in the middle; courts in many places go out of their way to protect tenants from those “evil, greedy, uncaring landlords.”

Those tenants are trespassing, but you would have no luck with the police having them removed since police don’t want to get involved in a “civil matter.”  That is in spite of the fact that these people are in the property stealing the rental because you can’t rent it while they are occupying it. Besides, the police officers would have to write long reports about what happened, something that, trust me, they hate to do. 

You will have to file an eviction against these holdover tenants. One step that might persuade these squatters to move immediately is that you inform them that you are going to file the eviction at the courthouse the next day if they have not vacated.  This is a slam-dunk eviction since they had been notified, presumably in writing, that they were to vacate at the end of the lease.  Big warning! If you did not notify them in writing, you will have to begin the process all over again. Otherwise, the judge would throw the case out of court since you have no proof that you told them you were terminating their tenancy. Check the procedure for starting the procedure in writing below.

Do not, under any circumstances, ever, even think about locking them out until you have the judge’s order in hand evicting them and a deputy sheriff or constable to serve the papers.  Locking them out is called constructive eviction and is illegal in every state.  Likewise, don’t take the front door off, turn off the heat or electricity.  Anything you would do to make living in the property difficult or impossible is considered constructive eviction and would result in a judge ruling letting your tenants live rent-free for several months.

If your “notice” that you would not be renewing their lease and they were going to have to move was oral, it is not valid.  Here’s what you have to do.

Send a notice in writing, according to the laws specific to Chicago, where your property is.  Laws are different in every state and in some cities, so do not under any circumstances use a form you find at the office supply store.  Those forms are generic and dangerous, and probably comply with few state laws or city ordinances and almost certainly not the ones where your property is.  Get a form from your local apartment or rental owners association, or from an experienced real estate attorney. If you use the wrong form, your tenants could end up staying rent-free for three months.

Make sure you give adequate notice, whatever that is in your area.  Most state laws are for 30 days, but check to make sure.  Also, make sure the procedure for serving the notice.  Can you mail it Certified Mail?  Can you send it First Class Mail?  Must it be hand delivered?  Must it be served by a process server?  If you don’t do it right, once again your tenants get to live rent-free for a couple or three months.

Finally, do not accept any rent from these tenants during this debacle.  If you accept rent from them, you have confirmed their tenancy and must begin the process all over again. 

These tenants will get out soon as long as you do everything exactly correctly. As I said before, the courts are there to protect tenants, not landlords.  With each step, you take to get rid of these undesirables, keep that in mind.  Your final reward will be when you get a call from another landlord asking for a reference.

By Robert L. Cain, Copyright 2022, Cain Publications, Inc.

PROPERTY NEWS SERVICE

Americans are “hoarding money,” reported the Wall Street Journal January 13. “Worried about their health, their jobs and the prospect of a deep recession,” they socked away money and “amassed record savings levels.” I’m not certain what Americans the Journal was describing, but it certainly was not the average person.

Meet Joe. Joe couldn’t be more average. He and Joan, his wife, are 38 years old and earn the median $51,383.18 a year net in salaries. Also right at the average, they spend $61, 224 a year. Trouble is, with expenses exceeding their incomes every month, they go farther in the hole, scrimping and running up their credit card debt.  They would love to save money, but can’t figure out how. They hope a big tax refund will help pull them out of debt. Forget about saving anything. They just want to get somewhere approaching debt-free.

During COVID, they got the opportunity to spend less with Joe working from home a lot, not having to buy so much gas, and eating lunch at home. Beginning February 2020, Americans’ savings rate jumped over 30 percent. COVID was to blame, as people curbed spending and stockpiled cash but left Joe out of the equation. Some of the savings went to retirement funds which now have an average balance of $255,200, not enough to retire on but a good start if you’re 40. Joe just wishes he could save into his retirement fund more than his company pays.

Average Joe has company in his lack of savings. Statista reports that 81 percent of people have less than $5,000 in savings. Mostly that 30 percent increase in savings was from people earning more than the average person. From people with higher than average incomes or lower expenses in 1990, gross private savings in the US went over $1 trillion for the first time reaching $1.14  trillion. It reached $4.72 trillion in 2019, far more than the rate of inflation which would have amounted to $2.13 trillion.

Joe lands smack dab in the middle of average of 48.5 percent with a high school diploma and a couple of years of college. He dropped out to earn money.  During his short college career, he accumulated student loan debt amounting to almost $39,000, just about average and that he still pays on. He has more student loan debt than credit card debt, also just about average. No wonder Joe can’t save a dime.

The savings aren’t spread evenly. The average American household has saved $41,700, a misleading number. A more accurate and telling measure, the median savings are only $5,300 which means half of the people have $5,300 or less in savings. Joe joins the 55 percent of the population that couldn’t survive more than four months without income if he lost his job. He’d have to deplete his minuscule retirement fund to survive then find a way to pay the taxes on it.

One place Joe isn’t average is his credit score. The average FICO score, reports Experian, is 711. What with having to skip payments occasionally and worry that his car might be repossessed because of missed payments, declined credit cards because of missed credit card payments and that he might be evicted because of late rent payments, Joe’s credit score is 625. He teeters on the edge of insolvency every month. The stress and credit score are killing him.

Joe rents a house but the rent keeps going up and he has been late with the rent six times in the past year.  With the eviction moratorium over, he is afraid to open his mail from the property management company. It gets worse. Rents are increasing more than 30 percent in some cities making living too expensive for even ordinary people like Joe who have stable jobs and questionable credit. With the lack of available housing, landlords can be just about as restrictive as they want in their rental requirements. Joe needs to move and might be forced to get “creative” in the information he puts on his rental applications and the documents he presents.

He’s not alone. Snappt reports that 12.2 percent of rental applications contain fraudulent information.  Joe will have to resort to document fraud to even get a landlord to consider him. With his credit score at 625, he is competing with applicants with average or better scores. The house where Joe and his family live is a place he can be proud to live in. He won’t be so proud of where he ends up after he is forced to move. Worse yet, if the landlord discovers his fabrications, he’ll have to move again immediately for lying on his rental application.

Then there’s Joe’s job. He’s worked there for five years and his present home is a ten-minute drive to work. When he has to move, chances are the drive will be much farther and thus harder on his car. If the car breaks, Joe might not have the money to fix it considering that 44 percent of people find themselves unable to come up with even $400 in an emergency, reports debt.org.

Those who should know keep talking about how people are doing better than ever with savings growing and wages increasing. They talk about the pent-up demand for spending and the inflation that results partly from increased spending. Rarely mentioned are the “average” people stuck in the middle, just trying to get by and hoping nothing so much as an unexpected $400 bill shows up.

#propertymanagment #rentals #landlord #rentalproperty #renting #landlords #getitrented https://www.amazon.com/dp/B072JHCPM8

By Robert L. Cain, Copyright 2022 Cain Publications, Inc.

PROPERTY NEWS SERVICE

Financial disaster looms reports Susan Tampor in a Dec. 22, 2021 article in the Detroit Free Press. Two senators and  a representative in a Dec. 8 letter to President Joe Biden called it “alarming new information.”  Another senator, Joe Manchin, warned of “a big hole in financial safety.” And the Detroit Free Press in the same article also warned that “families face financial challenges .”

The result could be unpaid rent, wage garnishments, and auto repossessions by late Spring or early summer for the 36 million households that receive the child tax credit.  The double whammy comes from the end of student loan forbearance on May 1 and the loss of the child tax credit.

Here’s how it can end up a serious problem for the US economy.  The total hit could mean $837 a month for those who have both student loans they aren’t paying on now and the end of child tax credit.

Student loan payments average $393 a month. Some pay more and some less, but that’s the average.  Child tax credit means an average extra $444 monthly in the pockets of parents.  Both the student loan forbearance and the child tax credit were put into place as part of the CARES Act.  They both face deadlines with the result that families could end up in the hole every month.

With Student loan repayments with 41 million borrowers resuming May 1 and the child tax credit that ended Dec. 15, their canceling can throw a monkey wrench into the economy.

The bigger hit faces student loans in default.  CNBC reported on Oct. 8 that “because along with their wages and Social Security checks, those who’ve fallen behind on their education loans can have their annual tax refunds seized by the U.S. government. This can cause people to also miss out on the child tax credit and the earned income tax credit, since those are usually paid out in tax refunds.” Those total some 9 million, that’s half, of the 18 million student loan borrowers, reports a March 24, 2020, Washington Post article.

Let’s look at how that could affect so many Americans. The Bureau of Labor Statistics reports that the median wages and salaries are $4247 a month. Subtract taxes withheld of an average $2988 per month, and net income lowers to $1267.  Many families have two incomes. That makes a net monthly income for the household of $2534. For the sake of this discussion, I doubled that, figuring it close enough to make the point. Rarely are both spouses earning the same amount with women often earning less.

Now we subtract outlays. Figure average transportation costs of $813 a month per the Bureau of Labor Statistics; that includes car payment, gas, maintenance, and insurance, plus a couple of lesser costs such as public transportation.  

The average student loan payment reports the US Department of Education in $393 a month.  If both adults have student loans, double that to $786. 

Thus we have $2534 less $813 less $786 leaving $1328. They still haven’t paid rent. The median monthly amounts to $1104. That leaves $224 a month for food and to take care of children.  That’s not to mention utilities, eating out, credit card payments, and such “necessities” as the cable bill.

It gets worse. Some $70 billion of back rent owed by 10 million people eagerly waits to result in evictions because tenants simply don’t have the money. Those rents accumulate and add interest making it even more difficult for those receiving the child tax credit and student loans in forbearance when they have to start paying them.

Add back in the average $444 for child tax credit and student loan forbearance and things look better. It bumps up the average income to $1061 a month, enough for food and maybe a dinner out, the electric bill, and clothes for the kids.

Who doesn’t get paid? The biggest expense is usually rent.  Depending on the landlord, paying the rent might be delayed for some time. The expression “understanding landlord” in the Bad Tenants’ Dictionary means one who isn’t too insistent on payment of rent.  An “unreasonable landlord,” meanwhile insists on timely rent payment. Thus, depending on which landlord they have, they can beg off paying rent or look for another bill to put off paying. Maybe the car payment, the Visa bill? No matter what, someone won’t get paid.

Will these dire circumstances all come about? Maybe, maybe not. If student loans get forgiven or forbearance extended again, and Congress passes an extension of the child tax credit, things will stay the way they are now, for a while at least, for families who depend on the child tax credit and owe student loans. Secretary of Education Miguel Cardona stated, “As we prepare for the return to repayment in May, we will continue to provide tools and supports to borrowers so they can enter into the repayment plan that is responsive to their financial situation, such as an income-driven repayment plan.” There’s no way to predict exactly what will happen.  But the result of student loans becoming payable again and of the child tax credit going away can result in numerous evictions, car repossessions, evictions, and employees unable to get to work.  We must prepare ourselves for the possible financial disaster.

By Robert L. Cain, Copyright 2021 Cain Publications, Inc.

PROPERTY NEWS SERVICE

Smart and experienced investors plan thoroughly.  Because they have been doing it for so long and so successfully, they have a list, possibly just in their heads, of issues that can pop up with any property they might consider buying.  A search of the internet and the numerous books I have on the shelves in my office comes up with the usual advice about choosing a property.  They are all valid, excellent, and important factors to consider: Inspect the property carefully, check the rent rolls, look for hidden problems, and so forth.  But these experienced investors do even more.

The difference between that advice and what I’m going to discuss here has to do with what surrounds the property.  I’m going to deal with the monsters and assorted creepy critters lurking down the block, inside school district offices, and city hall waiting to pounce on and devour real estate investors.

These issues may be difficult to foresee, but are often discoverable with a little research and keeping up with local news. 

The drug house next door

Smart investors survey the neighborhoods around prospective properties.  That, of course, includes neighborhood crime statistics and the ownership and management of nearby properties.  Unfortunately, few of us have crystal balls that allow us to see where a neighborhood might go in a couple of years even though everything is fine now.

Then a nearby investor sells an apartment building, gets a new manager, or simply stops paying attention and, presto! in moves a drug dealer or two along with the druggy tenants eager to live close to their crystal meth supplier. 

A drug house can decimate a neighborhood.  And they can appear even in what seems to be the most stable of neighborhoods.

The disappearing school

Many cities suffer from declining public school enrollments, often not even for all the same reasons.  Smart investors carefully check out the school districts and the schools around their prospective investments.  After all, good schools draw parents who want their children to get a good education.  Most likely, that correlates with responsible parents who will likely be better parents than the parents who think of schools as someplace to babysit their children to get them out of their hair while they sit in the bar, smoke dope, and wait for their welfare checks.

School boards sometimes make bizarre decisions and close under-enrolled schools combining them with other schools.  Closing a school, especially a first-rate one, can also decimate a neighborhood.

The school morphs into disaster.

Principals and teachers transfer, or are transferred, to different schools every year.  Sometimes a principal who had created an exceptional school gets her just reward and earns a transfer to an under-performing school to work her magic there.  Often those principals take teachers with them, the best ones.  What replaces that principal and those teachers might make the old school less than desirable.

How about an entire school district?  Take, for example, the Clayton County, Georgia, school district that lost its accreditation in 2008.  An entire school district losing accreditation had happened only twice before in 40 years.  Think what that did to Clayton County rental properties.  They regained accreditation in May 2009, but the damage couldn’t be repaired.

A bad school, or school district, does a number on the neighborhood or even an entire county.

Local government engages in government thinking.

It might be a huge increase in property taxes for non-owner occupied properties, a sales tax on rents, rental inspections, or a new fee inflicted upon rental properties. No matter which, it affects the ability of a property to turn a profit.  Rents can only go up so far because they have to compete with properties just on the other side of the city limits that aren’t saddled with those extra costs.  That means investment real estate owners can’t make as much, or any, profit on their rental properties as the rents increase and the vacancy rate follow. 

Of course, then, with vacancies increasing and rent amounts dropping, the money the city anticipated receiving not only disappears but the net receipts decrease. Let the whining begin. But that’s what governments are good at: government thinking. You can’t do just one thing. Every action has consequences, many predictable.

Who would have even dreamt of such things happening?  But there may lurk even more unexpected and unpredictable events, ones I can’t think of now so bizarre and rare that they might happen only once or twice in a century.

Can we think of everything?  Obviously, we can’t.  Can we do something about unexpected events?  Usually. The most important thing to remember about rental property investing is to pay strict attention to everything that might affect property values.  After all, real estate investing is hands-on if it is to be successful.  Paying attention involves more than just scrupulous maintenance and consistent rent collection.  It requires watching out for those monsters and creepy critters waiting to negatively affect our investments.

How you create goals makes all the difference

By Robert L. Cain, Copyright 2021 Cain Publications, Inc.

PROPERTY NEWS SERVICE

How will you know when you are successful? If you believe you are now, how do you know?  Most people, landlords included, simply cannot point to an accomplishment and state positively that they have been successful. I know just about every landlord had visions of being successful when he or she bought that first rental property. Success still waits for every landlord to grab and run with it.  And you can snatch success or restart it in the next month. So get ready to set New Year’s resolutions that might encourage success. Details forthwith.

Because of my insatiable curiosity, I did a search for landlord New Year’s resolutions. I came up with three or four websites that listed at least 10 each.  The goals in each were remarkably similar even if worded slightly differently.  All were aimed at getting landlords to do the things that will make them successful in their businesses. But they don’t provide the final but essential step to accomplish those goals.

We are to “cut costs” and “watch cash flow.”  We are to “get better tenants” and “screen better.”  We are to prepare a maintenance plan and schedule maintenance.  We are to “get organized.” We are to “get rid of bad tenants.” We are to “enforce late fees.” We are to “increase rents.”  Fluff, fluff, and more fluff. Here’s why.

Each of these goals appears worthwhile.  But they are fluff.  Two more, which rank as fluffiest, were “be proactive” and “focus on the long-term.”  Huh?

The essential part of any resolution or goal is an objective, measurable result so you can tell when you have accomplished it. You can point to it and say, “I did it!”  That is not possible with any of those fluffy ones I found on the websites and listed above.

Of course, none of these websites could provide actual measurable goals because rental property success is measured one landlord at a time, one property at a time.  Each landlord’s success is unique to him or her, not to some overall, generalized goal such as those the websites listed.

Let’s take one or two of these goals and see how to put them into practice so they can be measured.

“Get better tenants” is a broken record to many landlords.  We all want the best tenants possible renting from us.  Okay, how do we know if Richard Renter standing in front of our desk with a rental application mostly filled out (except for the landlords and addresses where he’s lived that he “doesn’t remember,” of course) will be someone whom we would accept as a resident in one of our rental properties? Would he be a “better tenant”?

Since each property is different, attracting different qualities of applicant and tenant, we can’t make a blanket assumption of the classification of “better tenant.” That requires carefully crafted rental policies and standards reflecting the demographics of each property that we can use to compare the qualities of each applicant against.  Without those, the judgment of “better tenant” is left to our whim, mood at the moment, and how good a salesperson the prospective tenant is.

Thus, a measurable resolution might be worded, “create rental policies and standards for each rental property that includes minimum income required, minimum length of previous residence required, minimum credit score required, and quality of landlord references, and do it by January 15, 2022.”  Then decide for each property what those are, write them out, print them, and hand them to each applicant, making you ready to measure each rental application against them.

“Get rid of bad tenants” is no question a worthwhile, profit-enhancing goal.  But how do you measure who a “bad tenant” is?  That may be a harder one.  I have had tenants who irritated me and whom I was happy about their moving but who also paid the rent on time and took care of their homes.  Were they “bad tenants”?  Only when I got the notes with each rent check with complaints such as “light bulbs burn out too often” did I think of them as “bad tenants.”  Of course, the evil end of the “bad tenant” continuum is Tina Tenant who hasn’t paid rent on time, if at all, since the first month she lived there and whose boyfriend moved in with her along with his constantly “visiting” friends who have wild, drunken, drug-induced parties every weekend.  Obviously, Tina goes.

But somewhere in the middle is a continuum midpoint for tenants to get rid of and tenants who are simply annoying.  Again, with each property, that cutoff may be somewhat different. and for each landlord it may be different depending on a landlord’s ability and need to tolerate irritation. But the important point is that each landlord has to decide where that cutoff is. How many times may the rent be late?  How many times do the police have to come?  How much damage to the property must there be?  Answer those questions about each tenant in each property.

By all means, make New Year’s resolutions.  Raise the rent, get better tenants, enforce late fees, get organized, but write down exactly what that means so you can point to success when you accomplish it. No more fluff, only measurable success.  It is your success and you can accomplish it if you know exactly when that success has arrived.

By Robert L. Cain, Copyright 2021, Cain Publications, Inc.

PROPERTY NEWS SERVICE

On your mark, get set, go! The time has arrived to be thinking about where you stand in the race for success next year. It is a race, you know. It’s a race between you and a neighborhood that may be declining or improving. It’s a race between you and properties that always need updating and repairing. It’s a race between you and government and its agencies that incessantly pass laws and create new regulations that not only cost you money, but make it markedly more difficult to earn a fair profit. And finally, it is a race between you and your tenants. 

Between you and your good tenants, the race is to not only keep them as tenants, but to make them such happy customers that the idea of moving will never even be a flicker in their subconscious. Between you and bad tenants, the race is to get them out before they do too much damage, drive off your good tenants and receive ever more immunity for their outrages from the courts and legislatures. 

How to win the race? Knowing what you have to do to win leads the requirements. John Maciha writes in “The Eleven Commandments of Budgeting,” “Use the budget process to analyze your real estate or property management business. Are you positioned properly for the short-range as well as the long-range? Are upgrades needed to remain competitive? Do you need to hire more people or get more equipment?” 

First thing you do, then, involves figuring out where you are and where you want to be. What is your position in the market now? Is it what you had planned? 

Sit yourself down and plan what you want to happen in the next year. I always have a problem doing that myself. I can find all kinds of things to do, including Freecell, watching sports on television and sweeping the patio, rather than figure out what needs to get accomplished and where I want to be. My brain dries up. Over the years, though, I’ve learned a few tricks to get my brain primed to gush forth with some pretty good ideas. I’ll tell you about three

Brain fooling trick #1: The 20-Idea Trick 

This one works for me just about every time. I wish I could claim credit for it, but I can’t. I first heard about it from the world-famous motivational speaker Brian Tracy. And I don’t imagine it is original with him. Write down the question or problem you want to find an answer or solution to, such as “How can I attract better tenants?” Now write down 20 possible solutions. It’s called “mind storming.” 

You have to be careful with yourself. Don’t pass judgment on the ideas as you go along, just write them down. Most important, sit there until you come up with all 20. It has to be done in one sitting. No getting up, mowing the lawn, fixing that leaky faucet in a rental you’ve been putting off for a couple of months; stick with it! 

The first four or five will come easily. The old standby ideas come to mind first. The next few will be a little more difficult. By the time you get to 16 or 17, you’ll come up with some pretty good ideas. That’s why you sit there and mind storm until all 20 are on paper. Just watch—chances are you’ll get so many good ideas that it may take several weeks to implement them all. 

Brain fooling trick #2: The 10-Minute a Day Trick

Jay Johnson of Note Finders of America writes, “Zig Ziglar advocates spending 10 minutes a day, immediately after awaking, writing down 10 ways you could become more effective at what you do. 

“Would you spend 10 minutes a day if you were GUARANTEED to accomplish what you want? My bet is NO! Because most people don’t believe that this can work ‘it’s too simple!’ But the magic is that it does work! 

“There’s brilliance in what Mr. Ziglar suggests. First, it will get you thinking about what it is you want. Second, it will get your mind on the ‘right track’ and you will find solutions to obstacles or problems you might be experiencing. Third, you will get a continual supply of fresh ideas. And last but not least, by committing to a daily ritual, such as spending your first 10 minutes focusing upon what you want, you will open pathways to the powerful subconscious mind. The subconscious mind can help you solve any problem or overcome any obstacle.” 

Brain fooling trick #3: The Play with Numbers Trick

Nothing more than basic goal setting, figure out where you want to be financially at the end of a year, five years, ten years or whatever. Write the figure down. 

Now comes the more difficult part, break the figure down incrementally to find out where you must be in a year, in six months, in a month. Then you have a goal to work toward and you are able to measure your progress. 

Need more ideas on how to progress? Go back and use brain-fooling tricks one and two. 

Positioning yourself for success takes planning. Block out some time now before the end of the year to get yourself ready to be even more successful in the rental property business next year—to win the race against the neighborhood, the government, and your tenants.

#propertymanagment #rentals #landlord #rentalproperty #renting #landlords #getitrented https://www.amazon.com/dp/B072JHCPM8