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Smart Landlord Policies for Pet-Friendly Property Rentals

Want a surefire way to increase tenant demand for your rental? Take down the No-Pets Allowed sign.

The decision about whether to allow pets is a tough one for many owners, and there are no right or wrong answers. But some surveys show that nearly 75 percent of renters own pets. That’s a huge pool of potential tenants to turn away.

Tenants who find a welcoming home for Fluffy are also more likely to stay longer, which can reduce vacancy time. For owners renting their property as an investment, being pet-friendly makes good business sense.

But allowing pets isn’t always the right answer for owners renting out a home they plan to return to. For owners who have pets themselves, allowing renters to keep a cat, dog or goldfish will likely make leasing the home faster and easier. For those who haven’t had pets, keeping the rental pet-free is a reasonable choice.

According to a recent survey by Apartments.com, 9 out of 10 renters said deciding where to live hinged on the landlord’s pet policies. Seventy-two percent of renters said they owned pets.

Protecting Your Property When Allowing Pets

How can you avoid the dog that barks day and night and chews the cabinets, or the kitty that favors the closet floor over a litter box? Finding responsible pet owners is key to protecting your property and neighbors’ sanity.

The Humane Society suggests that landlords check references on both the tenant and their animal, including calling prior landlords, the veterinarian and neighbors to ensure the animal behaves and won’t cause serious damage.

The organization suggests owners limit the number of pets allowed in each unit and approve pets on a case-by-case basis, rather that create limits based on size or breed. The Humane Society recommends creating a pet policy that outlines acceptable pet behavior and requires that all pets be licensed, up-to-date on vaccinations and spayed or neutered.

Deposits and Fees

Beyond policies, landlords often charge extra deposits, fees or pet rent to limit risk and cover the cost of additional cleaning or wear and tear animals can cause to the unit, building and grounds. In the Apartments.com survey, nearly 80 percent of renters said they had to pay a fee or deposit for pets, with more than half paying $200 or more per year.

Be aware of what’s customary in your neighborhood plus local laws when deciding how much of a fee or deposit to charge.

Preventing Mold Overgrowth and How To Prevent It

Mold problems can be incredibly expensive to repair, sometimes requiring entire rooms being torn down to the studs. Certain types of mold can cause illnesses from skin irritation to obstructive lung disease. What is truly frightening about mold is how easily it grows. One study from the University of Arizona showed that 100% of the homes it tested showed positive for mold (1). 100%! If mold is so pervasive, how do we prevent it?

Mold Audit Your Property: Start by doing an audit of your property for hazards. Do you notice any of the following?

  • Flood prone areas
  • Carpeting in moisture prone areas
  • Water stains
  • Condensation build up on windows
  • Poorly ventilated kitchens or bathrooms
  • Clogged & broken gutters

Look into the best fix for your problem(s). While some solutions can be simple, some may require more complexity and cost.

Air Out: Moisture builds and accumulates in moist areas when there is insufficient airflow or ventilation. Make sure that you open windows in unoccupied properties regularly. Install high functioning fans and stove hoods to stem mold growth in the kitchen, laundry room and bathrooms. You may even consider adding dehumidifiers into your properties.

Keep Water Away: It’s important to remember that buildings are susceptible to mold growth from the outside in. Think about where water accumulates around the perimeter and then direct it away. Use flexible extensions on the end of downspouts and alter ground cover choices. Remember to keep gutters clean to avoid pooling water at the roofline.

Your Plumbing: While it is true that some leaks can be spotted and easily fixed throughout your home, many cannot. This is because much of plumbing systems remain unseen behind walls and underfoot. Major mold growth occurs frequently in properties with leaks that have been unaddressed for long periods, as the first warning sign is often a water stain or worse. Consider installing a leak detection system like AquaTrip.

AquaTrip is a permanently installed system that constantly monitors the entirety of a building’s plumbing. AquaTrip saves money by curbing potential water damage, reducing excessive water bills and controlling the potential for mold overgrowth. You can learn more about AquaTrip by visiting buyaquatrip.com or call 1-844-4-AQATRP to find out how you can join the Pilot Program for savings up to 50% off!

5 Ways To Increase The Value Of Your Rental Property

When you hold property as a rental investment, it’s only natural to want the value of your investment to increase. While the real estate market plays a role in the value of your properties, you can take matters into your own hands with home improvements that add value.

Five great ways to boost the valuation of your rental property and how to make these improvements.

Replace old bathroom fixtures. Bathroom upgrades deliver immediate impact and value. Replace outdated sinks and toilets with low-flow models that feature new hardware. You’ll save on water bills and instantly improve your apartment’s valuation. When replacing bathroom fixtures, hire a professional plumber to do the work.

Renew kitchen countertops. Even a minor kitchen upgrade will retain roughly 80 percent of its value five to 10 years down the road, which is great news for property owners who want to make money now and sell for a profit in a few years. Replacing cheap laminate countertops with wood, granite, cement or engineered stone is a great place to start when renovating an old kitchen. Hire a countertop installer for this task.

Dump old carpet and linoleum for high-end flooring. If your rentals have linoleum and wall-to-wall carpeting, this screams cheap and ugly to renters looking for a new home. Increase your apartment’s appeal and valuation by upgrading your flooring. Natural materials like wood or stone are favorites. These materials are durable, easy to clean and hold their value once installed.

Update lighting and appliances. Adding new fixtures and appliances can brighten the apartment, increase energy efficiency and give an old unit new life. If you have pre-1990 lighting, replace it to slash energy expenses and make the apartment look more modern. Always have lighting installed by a licensed electrician.

If you have old appliances — anything from a dishwasher to a hot water heater — swapping them for sleek, stainless steel, energy-efficient models will boost your return on investment and slash your overhead. Order new appliances during seasonal sales to get the lowest price. Many stores take away your old appliance for free when they install the new ones for you, reducing your overhead.

Increase storage. Storage is a top priority for renters. Whether you add a basement storage cubby, place a shed in the backyard, add open shelving in the bathroom, or put hooks by the front door, you’ll help renters make the most of the space. You can keep things cheap and easy by using hooks and shelves you can hang yourself, or hire someone for more sophisticated storage upgrades.

Tips for Property Owners Who Want to Improve Rental Investment Value

Plan smartly by making home improvements in between tenants. Time your repairs so the unit’s ready when demand peaks in your area. This way, you can rent out the renovated unit quickly and command a competitive price. In turn, immediately starting to recoup the money spent on repairs through the higher rental property valuation and new market-rate rent.

Questions You Cannot Ask a Prospective Tenant

When interviewing prospective tenants, you want to make sure you get the best tenant for your property, so naturally, you want to ask them as many questions as possible. You have to be careful however. There are many questions which you are legally not allowed to ask tenants. Learn what not to say when interviewing a prospective tenant.

1. Questions That Violate Fair Housing Laws
Never ask anything that could be interpreted as discrimination under the Federal Fair Housing Law or under your State’s Fair Housing Law.

The Federal Fair Housing Act protects seven classes: race, color, religion, sex, national origin, disability and familial status. In addition, many States have additional protected classes such as marital status and sexual orientation.

Examples of questions/statements that could violate the Federal Fair Housing Act:

Race:

  • What race are you?
  • Are you Chinese or Japanese?
  • You look Italian. You should consider renting in the next town over, there are a lot of pizza places around there.
  • You would love the area, a lot of minorities live here.

Color:

  • You have very dark skin, are you white or Hispanic?
  • You’re very pale, I don’t know if you’d fit in here.
  • You have dark skin, I don’t know if you’d feel comfortable in the neighborhood.

Religion:

  • I’m not Christian, so I don’t want you to put up any Christmas decorations in my building.
  • There aren’t a lot of temples around here, I don’t know if you’d fit in.
  • Are you Buddhist? Don’t go turning one of the rooms into one of those meditation places.

Sex (Includes Gender and Sexual Harassment):

  • Having someone who looks like you as a tenant would definitely make me check on the building more often.
  • I don’t feel safe renting to a woman on the first floor.

National Origin:

  • In what country were you born?
  • Where were your parents born?
  • What is your first language?
  • Are you disabled?
  • I don’t allow animals, so I will not allow your service dog.
  • Are you an alcoholic?

Familial Status:

  • I don’t rent to people with kids.
  • Are you pregnant? I don’t want a screaming baby disturbing the other tenants.

To be safe, you should also avoid questions about marital status, sexual orientation, source of income, age or any other possible protected class in your State.

  • Are you married?
  • Are you divorced?
  • Are you gay?
  • (To a man:) I think having your boyfriend visit will make the other tenants uncomfortable.
  • You’re going to have to pay a higher security deposit because your income is from unemployment and I’m afraid I might have to evict you in the future.

2. Have You Ever Been Arrested?

You cannot ask a prospective tenant if they have ever been arrested. There is a big difference between being arrested and being convicted of a crime. You can ask the prospective tenant if they have ever been convicted of a crime. This is something that can be readily discovered by running a background check. Keep in mind that in many states, such as California, you cannot discriminate against a person because they have been convicted of a crime.

The crime would have to influence their ability to be a good tenant, such as an illegal drug conviction or a history of violent offenses which could put other tenants at risk.

3. Any Question That Is Not Part of Your Normal Qualifying Standards

You must have the same qualifying standards for all prospective tenants. It you do not follow the exact same procedures for all tenants, you could be accused of discrimination. For example, while it is legal to perform credit checks on tenants as long as they consent to it, if you only perform credit checks on African American tenants, this would be considered discriminatory.

Another example would be if you asked people who were not necessarily well dressed questions about their eviction history or criminal convictions, but ignored such questions for people who were well dressed. This would also be discriminatory. You should set a list of questions that you will ask all prospective tenants to “qualify” them as potential tenants.

Tenant Screening Saves You Time and Money

After a few weeks on the market, you finally found a tenant for your rental property. Because it’s been sitting vacant for more than a month, you decide against the tenant screening service you normally use. The information on the application seems good, and the one reference you contacted vouched for the applicant. Everything should be just fine. Right?

Fast forward a few months.tenant screening saves time money

You haven’t received the rent on time since the tenant moved in and now it looks like you won’t receive this month’s rent at all. Your old neighbor called to let you know that the yard looks horrible and there’s suspicion of drug activity going on in your property. You remember reading somewhere that if a crime is committed in your property, you might be found liable for it.

You’re out the rent money. You’ll have to pay to deal with the eviction and there’s no telling how much damage has been done to the property. Once you get the tenant out, it will sit vacant and produce zero income until you’re able to fix it up, get it back on the market, and find a better tenant.

This scenario plays out every single day with landlords across the country, but it doesn’t have to.

save-time-money-piggy-bank-clock

Tenant screening saves you time and money.
Here’s how:

Financial History
Checking a tenant’s credit score lets you know if they consistently pay their bills on time. You may decide to rent to someone with a poor credit history due to the circumstances surrounding their late payments or bad debt – medical problems, divorce, or more. Knowing their financial history lets you decide if you should charge a higher deposit or move on to the next tenant.

Eviction History
Eviction history information may come from just your state or you can check nationwide, but it’s invaluable to know before you approve a new tenant. There’s no guarantee that your tenant won’t need to be evicted even with a spotless history, but it’s always better to be safe than sorry. You can save yourself the time and cost of the eviction process by checking a tenant’s history and making the decision whether to rent to them or not.

Criminal History
If a crime is committed in your rental property, criminal charges could be brought against you. As a landlord, you also have an obligation to the neighborhood where your property is located to help keep it safe. A criminal background check, as well as checking the terrorist watch list and the sex offender registry list let you know ahead of time if you’re dealing with a dangerous felon or someone who simply made a youthful mistake. There isn’t enough money or time that can make up for a horrific crime being committed in your neighborhood or property simply because you didn’t have a criminal background check done.

Verification of Personal Information
This may sound basic, but you need to know if your tenant is who they say they are. Using a tenant screening to simply help verify their information may save you time and money as well as prevent further identity theft or other criminal acts. It’s likely that if someone lies about their basic information, their financial, eviction, and criminal histories may be spotty as well.

It may seem to be quicker and cheaper to skip the tenant screening with a new tenant. You need your property to produce income and for that you need a tenant. Screening protects you and your property as well as giving you peace of mind about who you’re renting to. Save yourself time, money, and headaches and screen all prospective tenants.

Position Realty
Office: 480-213-5251

How To Collect Money Owed From Your Tenant

Did you ever have to evict a tenant for non-payment of rent, then get stiffed for the bill? You may be able to collect what is owed to you, even years later.

First, you need a court-ordered money judgment. If you filed for an eviction in court, you received a judgment and order of possession – a document signed by a judge that permits a local sheriff or constable to forcibly remove the tenants from the property. In Arizona you get a money judgment against the tenant, but this requires one of two things:

1) the tenant must have been personally served with the court papers or…

2) the tenant must have shown up in court. If the eviction papers (the court papers, not the notice to rent) were posted on the door of the unit and/or mailed to the tenant, you generally do not get a money judgment from the court.

What About Security Deposits?

If you have a security deposit from the tenant, you can apply that against anything he owes you for back rent or damages. However, you still must comply with state law for notifying the tenant of your intent to keep the deposit. Even if you return the security deposit, you can still sue the tenant for actual rent owed and/or damages incurred to the unit. If the tenant left before the court date or you did not otherwise get a money judgment, you can always sue the tenant in your local small claims court for money owed and any damages to the property. The process is quite simple, and does not require a lawyer. You have to file the claim before the end of the statute of limitations, which generally ranges from three to five years.

Once you have a money judgment, you can collect it against all non-exempt assets of the debtor. Certain assets, such as retirement accounts, are exempt from collection by creditors. Also, keep in mind that assets of the debtor’s spouse may be attached as well in Arizona. Cash in bank accounts is the easiest target. If you have a copy of a recent check from your tenant, you can file for a “none wage garnishment” on their bank accounts through the local sheriff (this is why it is a good practice to make copies of your tenants’ checks each month to make sure you know where they are banking).

If the tenant is working, you can garnish wages, but the garnishment is limited to 25% of the wages of the debtor. Still, if they have a steady paycheck, you will get your money back, plus interest. If you get a transcript and record the judgment in county records, the tenant will not be able to buy a house in that county without paying you off. If the tenant owns other real estate in his name (not likely, but always possible), the judgment will create a lien on that property as well. If you do not know where the tenants assets are located, you can start a debtor proceeding in court to make him appear in court and answer questions regarding his assets. Failure to comply may result in a warrant issued for the debtor’s arrest. Depending on the amount of money owed and likelihood of collecting, this process may not be worth your effort. But, considering a judgment may be valid for as long as 5 years and you get interest on your money, why not make it a part of your business practice?

Position Realty
Office: 480-213-5251

How To Begin Investing In Rental Properties ~ Buy and Hold

In my judgment, investing in real estate to hold is the best method yet discovered for a person of modest means to become wealthy. Unfortunately, that doesn’t make it easy. Buying and holding real estate successfully requires accomplishing a lot of very different tasks simultaneously or it won’t work. To boil it down, there are five major components:

1 – Acquisition

2- Financing

3- Rehab

4 – Management

5 – Maintenance

In my experience, these five components of buy and hold real estate investing are the basis for building wealth in real estate investing. I will explain each in detail below.

Acquisition

You make your money when you buy. And that is just as true for buy and hold as it is for flipping. Some buy and hold investors can get a little lazy. Whereas flipping creates discipline by quickly showing whether the deal was a good one or not given how much money was made or lost on the sale, buy and hold has no sale. So it’s easier to justify (consciously or subconsciously) lower quality deals. Don’t make this mistake!

Poor deals on the acquisition side will hurt buy and hold investors in the long run just like flippers. More money will be thrown away, cash flow will be lower and refinances won’t pull money out or will force investors to keep high interest private loans. Buy and hold investors should use the same aggressive marketing and negotiating tactics as flippers and not settle for anything less.

Financing

Financing is generally the hardest part for buy and hold investing. Fortunately, there is an assortment of ways to finance properties to hold, but all of them require thriftiness. The first is to save money from a job and use that money to buy investment properties. For this model, FHA loans can be great here because you can buy any property up to a fourplex, live in one side and rent out the rest.

In addition, flipping and holding are by no means mutually exclusive. Why not hold every third or fourth property while flipping the rest? Or better yet, use creative financing (like subject to’s or seller financing) to buy a property for no money down. Or get a ma’ or pa’ private lender to lend you the full down payment. Or partner with someone who has money. Then they can bring the money and you can do the work. It’s not easy, but there are plenty of financing solutions available.

Rehab

The Sydney Opera House was budgeted to cost $7 million and take six years to complete. It ended up costing $102 million and taking 16 years! In other words, it always costs more and takes longer than you think. Contractors and employees are notorious for overcharging, procrastinating or providing poor quality work. So be careful when hiring and be quick to fire if needed.

The best contractors and employees generally come from referrals. Ask for them from people you trust whenever you can. Often local REIA groups will have a list of referred vendors and contractors. And when you are vetting such vendors, ask for references and check them thoroughly. And do not pay them up front!

It’s also important to work hard at accurate budgeting. Make sure to add in a contingency of 15-20% for the things that will inevitably pop up. And always double check your budget against your results. This is important to make sure 1) your buying criteria is right and 2) that you are not under-financing these properties.

Management

The big question is whether to hire a management company or do it yourself. The advantage to hiring a management company is that it frees up more time to look for properties. The disadvantage is that they cost money and that some are incompetent or even criminal. If you do hire a management company, just as with contractors, vet them thoroughly. You should ask for referrals from people you trust and then from the management companies’ themselves. And do not be afraid to fire them. A management company can make or break you and the bad ones will break you quicker than you think.

If you decide to do it yourself, it has to be a primary focus. Property management is the nuts and bolts of real estate, and without it, everything falls apart. Learn the law and consult with an attorney to make sure you are in compliance. In addition, you must have a thick skin and be able to tell a tenant “no” or some of them will walk all over you. Furthermore, know that you will eventually need to hire someone for leasing, maintenance and/or bookkeeping. In the meantime, you will need to be able to do basic bookkeeping yourself in order to properly do your taxes, assess your situation and obtain bank financing.

Maintenance

If you decide to manage yourself you should at least find a roving handyman you can call for maintenance issues (unless, that is, you are very handy). When you have enough units, you can hire someone full time. You will also need to have plumbers, electricians, HVAC technicians and the like on call for such issues.

If you use a property management company, the maintenance and turnover is the most important thing to watch as overcharges will usually go there. If maintenance expenses are out of hand, demand an explanation. If the explanation is unacceptable or the situation doesn’t change, switch companies. The same goes for prolonged vacancies.

These are, of course, just the broad strokes. For more information, read ,The Millionaire Real Estate Investor by Gary Keller and How I Turned $1000 into a Five Million in My Spare Time, by William Nickerson or view the many articles and books on this site.

Position Realty
Office: 480-213-5251

Common Legal Mistakes Real Estate Investors Make

You can’t expect to reduce your risk of getting sued to zero, but you can take steps to reduce your risk as much as possible. In any situation where your money is at risk, ask yourself, “Is there a better way?”

Know the legal and financial risks of the situations in which you place yourself, your business, your family, and your assets.

Without covering every issue involved, here are a few common mistakes that investors make, novice and experienced alike.

Poor Legal Forms

It’s amazing how short-sighted novice investors can be when it comes to shelling out money for good legal contracts. They often buy contracts at discount office supply stores, from Internet web sites, or borrow them from friends.

However, a real estate deal is only worth the paper it’s written on. Like the old expression, “every tax strategy works until you get audited,” it can also be said that “every contract works until you have a dispute.”

So invest in a good set of legal forms that apply to your practice and ask a local real estate attorney to review them. Also, make certain you fill in the forms correctly—a good real estate attorney will review contracts for just a few hundred dollars.

Too many people rely on real estate brokers to fill out contracts, which is fine for a “standard” deal. However, most brokers aren’t trained in legal matters and often create long contract addendums that are insufficient to protect your interests.

Illegal Discrimination

The Fair Housing Act of 1968, as amended, prohibits discrimination on the basis of race, color, religion, nationality, familial status, age, and gender. Many state and local laws also forbid discrimination on the basis of sexuality or source of income and the Americans with Disabilities Act makes it illegal to discriminate against disabled people.

If you harbor any such prejudices and would allow them to come into play when renting a housing unit, then you’re probably not cut out to be a landlord. However, many sincere real estate investors make honest mistakes that result in discrimination lawsuits. The best way to avoid these lawsuits is to be informed.

The Fair Housing Act may appear to be common sense and most people would never think of discriminating against people of different races or religions or on the basis of gender. However, it’s important to note that the Act extends beyond the screening process and into advertising as well, so watch the wording on your ads.

This is where many landlords and property managers make critical mistakes. Some people scour the classifieds looking for inappropriately worded ads so they can pounce on them and threaten a lawsuit. While someone must have standing to bring suit, these scoundrels often work in coalitions to ensure that all of their bases are covered.

For example, if you own a rental property in a predominantly Jewish community, its proximity to the local synagogue could be a major feature. But if your ad says “within walking distance of the synagogue,” you could be sending the message “gentiles need not apply”—even though this wasn’t your intent.

And keep in mind that you may not discriminate on the basis of whether a couple is married and whether children are to live in the unit. You may also not discriminate on the basis of age. Often, novice landlords aren’t aware of these areas of concern. And while it’s good that citizens are more aware of their rights today, it can create a bad situation for well-meaning landlords who are out of step with the law.

Be aware of your local laws and use good business sense. State law and local ordinances can extend similar protections granted under the Fair Housing Act to other groups. For example, California, Minnesota, and North Dakota prohibit discrimination based on source of income. In other words, landlords can’t discriminate against would-be tenants who rely on public assistance. Putting the political perspective of the landlord aside, such discrimination makes little business sense because people on welfare or social security are virtually assured of a fixed income.

The Americans with Disabilities Act (ADA) prohibits discrimination against the disabled and also requires landlords to make “reasonable accommodations” to disabled tenants. Who decides what’s reasonable? Typically, judges, if it comes to that. But while most landlords are aware of the ADA and would never stoop to discriminate against a person in a wheelchair, many are unaware that the ADA also protects mentally disabled tenants. A mental disability could also include recovering alcoholics and drug addicts. On the downside, these people can relapse; if they do, this can cause serious problems for you and other tenants. Everyone deserves a second chance and many recovering addicts become productive members of society. Those unable to recover typically have other problems and, thus, if you decide to reject their rental applications, it’s vitally important that you document additional reasons for rejecting their applications.

Improper Disclosures

Improper disclosures are a common mistake for investors. It’s critical to be aware of the federal and state requirements for disclosures. For example, federal law requires a lead-based paint disclosure on the sale or rental of properties that were built before 1978. State laws may have additional regulations.

It’s become common practice for real estate brokers to use a property disclosure form as a general-purpose sell disclosure for all aspects of the house. Even if you’re selling your house on your own, be sure to use one of these forms. Whenever in doubt, disclose what you know, especially something the buyer or tenant may not know about, such as dangerous conditions, water damage, electrical issues, or plumbing problems.

Illegal Solicitation of Money

Many novice investors try to solicit money for investing via public advertising or mailings. This is commonly referred to as syndication. You may inadvertently cross over a variety of federal and state securities regulations when trying to raise capital. Chatting with friends over the dinner table about a real estate deal is one thing, but advertising to the public in mass may be considered a public offering. Before soliciting money from strangers, review your marketing, paperwork, and solicitation strategies with a local attorney well versed in this area of law. You may be able to get away with a good set of written disclosures if you solicit money on a limited basis, but it’s better to be safe than sorry.

Independent Contractor Liability

The IRS and your state department of labor are on the lookout for employers who don’t collect and pay withholding taxes, unemployment, and workers’ compensation insurance. If you have employees that are “off the books,” you’re looking for trouble. If you get caught, you’ll have to pay withholding taxes and as much as a 25 percent penalty. Intentionally failing to file W-2 forms will subject you to a $100 fine per form. The fine for failing to complete the Immigration and Naturalization Service (INS) Form I-9 varies from $100 to $1,000 per form. Your corporation or LLC won’t shield you from liability in these cases, either. All officers, directors, and responsible parties are personally liable for the taxes.

If you hire people to do contract work for you on a per-diem basis, they may be considered employees by the IRS. If any workers fail to pay their estimated taxes, you may still be liable for withholding. If these workers are under your control and supervision and work only for you, the IRS may consider them employees, even if you don’t. If this happens, you may be liable for back taxes and penalties.

To protect yourself, you should:

  • Hire only contract workers who own their own corporation or get the business card and letterhead of any unincorporated contractors you may use so you can prove these workers aren’t your employees.
  • Require proof of insurance (liability, unemployment, and workers’ compensation) in writing.
  • Get written contracts or estimates on workers’ letterhead that states they’ll work their own hours and you don’t have direct supervision over the details of the work.
  • Have letters of reference from other people for whom the contractors worked to show that the contractors didn’t work solely for you. Keep these in your files.
  • File IRS Form 1099 for every worker to whom you pay more than $600 per year.

In addition to possible tax implications, an independent contractor can create liability for you if a court determines the contractor is your employee. For example, if your independent contractor is negligent and injures another person, the injured party can sue you directly. If facts show that you exercised enough control over your contractor, a court may rule that this contractor is your employee for liability purposes. As you may know, an employer is “vicariously liable” for the acts of his or her employees—the employer is liable as a matter of law without proof of fault on the part of the employer. Make certain you follow these guidelines when hiring contractors and pay particular attention to the issue of control.

Finally, under your state’s law be aware which duties are considered inherently dangerous, such as providing adequate security for tenants in a multiunit building. These duties can’t be delegated to an independent contractor without liability on your part, regardless of whether the person you hire is considered an independent contractor or an employee.

Position Realty

Office: 480-213-5251

How to Get Your Renters to Think Like Home Buyers

Most rental residents treat their dwellings like renters, not home buyers. That’s because rental residents “think” like they are renters, in almost all cases. However, I’ve found it is to the landlord’s advantage if tenants think like “future home buyers.”

Residents who think like home buyers act in the following manner:
Take better care of property than average tenants.

  • Pay rent on time and fulfill other obligations.
  • Handle minor repairs and needed maintenance.
  • Add upgrades/improvements to the property.

Therefore, from the very first month a rental resident moves in, one of you major management objectives is to change their mindset from renter to future home buyer. In fact, your opening letter of introduction, or cover letter, to announce your rental policies starts off: “Welcome Future Home Buyer”.

The process to change a resident’s mindset from renter to future home buyer is not instantaneous, but can be gradual yet continual and very effective. Here’s how I suggest you start the transformation.

WELCOME “FUTURE HOME BUYER”

In the first month, welcome the resident as a “future home buyer” and use that term in both oral and written communication.

Give on-time thank you vouchers.

At the start of the second month, after the resident pays the rent on time, send your resident an On-Time Thank You Voucher – valued at either $25 or $50 good toward the purchase of the home they are living in (or toward any one of your homes if that is an option you would consider).

The first time your residents receive this voucher, they will probably not call you up in immediate urgency to buy your home. But this strategy will start their minds thinking a little about the possibility of buying.

Oh, I almost forgot to mention, one small but significant point about how the on-time thank you vouchers system works. If a resident is ever late, any vouchers received up to that point are considered null and void. This point is spelled out on each voucher as a reminder to residents.

This is significant because when residents first start receiving the vouchers, it effects them. Even though they may not be sure if they will ever buy something; most people don’t want to lose out on something of high perceived value that they can receive. Residents will keep paying you on time so they can keep getting the $25 or $50 vouchers.

The vouchers begin to add up to significant amounts after several months, up to $600 in a year. Residents don’t want to simply throw that much money away or lose it. Some owners offer a one-time only, or once a year only, late payment without complete loss of accrued voucher total. With a late payment, owners deduct a penalty of 25% or 50% off accrued total instead of penalizing the full amount. Whatever method you utilize, the penalty should be significant to be effective.

Your residents will do everything within their power to be able to keep paying the rent on time each month, to keep from losing the possibility of using the vouchers. Don’t be surprised if the residents begin paying a week to ten days early to insure they don’t come close to missing out.

HOLD HOME-BUYING DISCUSSIONS

By the middle of their first rental year, you will want to ask the resident if you can have a home-buying discussion with them.

Hold home-buying discussions twice a year. They are an important part of the transformation process. During home-buying discussions, you share with your resident the buying possibilities, outright purchase, lease option, land contract, etc. As the owner, you should also mention your criteria for choosing whom you would sell the home to under favorable terms. Home buyer criteria should include someone with good payment history and good maintenance and upkeep history.

As the transformation from renter to future home buyer continues because of your home-buying discussions, your resident will take excellent care of your property.

It’s important that you understand that the objective of changing the resident’s mindset is to get residents to “start” to think of themselves as future home buyers, but it is not necessary that they actually buy a home. In fact, please note that you do not allow residents to cash in on their vouchers until an actual closing to buy the house takes place. Even though you are starting to change the resident’s mindset, in most cases you will not see the final transformation from renter to future home buyer to actual home buyer.

However, just getting residents to think differently of themselves, as future home buyers, during their stay in your rental, will cause them to perform differently. Even if they end up not buying one of your homes, and rents or buys elsewhere, the steps I’ve suggested you follow to start the transformation from renter to buyer, will greatly benefit you the rental owner. You will get rents on time, residents will take care of all minor repairs and maintenance headaches for you, because you are not dealing with a renter, you are working with a future home buyer, whose performance is determining whether he or she will be able to buy.

Stay in control and make the most of your assets.

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