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Top 5 Mistakes Landlords Make with Their Investment Properties

Managing an investment property is no easy task. It may sound like big money, but if you are not prepared it can turn into a huge money pit. As a landlord, you have a big responsibility to the property as well as the tenants. One small misstep could end up costing you valuable time, energy, and money. That is why you must make sure you do your homework before jumping in. Do as much research as possible. If you look up the latest real estate trends in the area or ask a local expert, you will be able to find enough information to help you make the best decisions when it comes to your investment property. Unfortunately, many landlords want to get started so quickly that they do not think before they invest. Here are the top five mistakes that landlords make with their investment properties:

1.Choosing the Wrong Tenants

This is one of the biggest mistakes you can make as a landlord. If you are renting your property out to a stranger, you must take the extra steps needed to make sure you get the best possible tenants in your property. If you do not know them very well, there are certain precautions you can take. Have them prepare the following:

a) Application Form: Have prospective tenants complete a written application form. This will include standard renter’s information such as names, numbers, employer, previous residences, income, etc. Each adult who will be living in the property would need to fill one of these forms out and minors can be added as well. They would sign that all the information they provide is accurate to the best of their knowledge.

b) Credit and Background Checks: Tenant screening is a great way to see how financially stable your prospective renter is. Credit reports often show if someone has been late on payments and the amount of debt they already have. A background check is very important, not just for your peace of mind, but also in consideration of the neighborhood. You would not want to rent the property out to a convicted criminal. It would compromise the safety of the area and could also bring down the property values.

c) Referrals: Asking for referrals from past landlords and current employer is a great way to go the extra mile in finding the perfect tenant. If the applicants have not be great renters in the past, then they probably would not move forward with their application if referrals are needed. A referral from an employer would also give you confidence that the tenant is gainfullyemployed and able to make a monthly payment.

2. Failing to Create a Thorough Lease Agreement

Creating a good lease agreement is where part of your research will come in handy. Many landlords will print the first form they see on the internet. Unfortunately, this form could be outdated and only relevant for a certain location. Make sure to find an application that has all your stipulations and current local regulations spelled out. Some tenants will comb through the entirety of the agreement to try to catch something that the landlord missed to exploit it. For this reason, it is very important that you create a thorough lease agreement. Be sure to add any rules specific to your property in an addendums section.

3. Lack of Communication

If you make yourself unavailable to your tenants, you are doing them and yourself a disservice. Your office should always be open and you should always be available by phone. Sometimes, home emergencies will come up and your tenants will need your ‘okay’ or your help to get the issues resolved. It can range from something small, like a door coming off its hinges, to something huge, like a flood or leak in the plumbing. The sooner you can get back to your tenants, the better for them and you. The longer you let an issue go, the more difficult it will be to fix a problem and the more resentment your renter could have for you. You want to make sure that your tenants have a good experience so that they are not criticalof you to future renters. This is especially important this day and age where you can review anything and anyone on the internet.

4. Setting the Rental Rate Too Low or Too High

Make sure you are setting the rental rate within the correct range for the property’s age and location. There is such a thing as setting the price too high and too low. If the rent is too high for the area or for how old the property is, no one will want to live there. The longer your home sits unoccupied, the more money you are losing each day. In the same vein, you do not want to set the rent too low. You may be able to get someone into the home quicker, but you could be leaving a lot of money on the table. The whole point in taking on an investment property is to make money. The best thing you can do is look at other rental properties in the area. Try to stick within the range of rental pricing you see in the neighborhood.

5. Delaying Eviction Process

If you do find yourself in the position of having to evict a tenant, try to get the process started as soon as possible. You can expect it to take about 30 days from start to finish, but many times, it is delayed because tenants will come up with excuses. As soon as you can tell there is a real issue, you should begin the process. The longer you wait to get it rolling, the longer it will take. The longer it takes, the more money you will be losing. It is important to note that the tenant is still legally obligated to pay the back rent owed to you. However, if a tenant has opted not to pay rent up until this point, you may be out of luck trying to collect it from them in the future.

Being a landlord is a tough role! If you avoid these common mistakes that most people make with their investment properties, you should have an easier go at it. The main thing to remember is that the more research and preparation you put into renting out your property, the more return you will see on your investment.

10 Rehab Tips That Increase The Value Of Your Property

You need to keep your investment property repairs to a minimum to stay profitable. You also need to keep your properties in good shape to attract tenants or buyers. There are the basic improvements, such as carpet and paint, but these can still costs thousands of dollars. The following are some inexpensive ways to improve your investment properties with very little cash.

10 Budget Rehab Tips That Boost The Value Of Your Investment Property

1. New Electrical Switch Plates

This is such a minor, yet overlooked improvement. Most rental owners and rehabbers paint a unit and leave the old, ugly switch plates. Even worse, some even paint over them.

New switch plates cost about 50 cents each. You can replace the entire house with new switch plates for about $20. For the foyer, living room and other obvious areas, spring for nice brass plates. They run about $5 each – not much for added class.

2. New or Improved Doors

Another overlooked, yet cheap replacement item is doors. If you have ugly brown doors, replace them with nice white doors (you can paint them, but unless you have a spray gun it will take you three coats by hand).

The basic hollow-core door is about $20. It comes pre-primed and pre-hung. For about $10 more, you can buy stylish six-panel doors. If you are doing a rehab, the extra $10 per door is well worth-it. For rentals, consider at least changing the downstairs doors.

3. New Door Handles

In addition to changing doors, consider changing the handles. An old door handle (especially with crusted paint on it) looks drab. For about $10, you can replace them with new brass finished handles. Replace the guest bathroom and bedroom door handles with the fancy “S” handles (about $20 each).

4. Paint/Replace Trim

If the entire interior of the house does not need a paint job, consider painting the trim. New, modern custom homes typically come with beige or off-white walls and bright-white trim. Use a semi-gloss bright white on all the trim in your houses.

If the floor trim is worn, cracked or just plain ugly, replace it! Home Depot carries a new foam trim that is pre-painted in several finishes and costs less than 50 cents per linear foot. Create a great first impression by adding crown molding in the entry way and living room.

5. Replace Front Door

You only get one chance to make a first impression. A cheap front door makes a house look cheap. An old front door makes a house look old. If you have nice heavy door, paint it a bold color using a high-gloss paint. If your front door is old, consider replacing it with a new, stylish door. For about $125, you can buy a very nice door.

6. Tile Foyer Entry

After the front door, your next first impression is the foyer area. Most rental property foyers are graced with linoleum floors. Many homes in Tampa, FL also have an outdoor porch that would benefit from new tile. Consider a nice 12″ Mexican tile. An 8ft x 8ft area should cost about $100 in materials.

7. New Shower Curtains

It amazes me that many landlords and sellers show properties with either no shower curtain or any ugly old shower curtain in the bathroom. Don’t be cheap – drop $40 and buy a nice new rod and fancy curtain.

8. Paint Kitchen Cabinets

Replacing kitchen cabinets is expensive, but painting them is cheap. If you have old 1970’s style wooden cabinets in a lovely dark brown shade, paint them. Use a semi-gloss white and finish them with colorful plastic knobs. No need to paint the inside of them (unless you own a spray gun), since you are only trying to make an impression.

Americans spend 99% of their time in the kitchen (when they are not watching TV). A fancy modern faucet looks great in the kitchen. They can run as much as $150, but not to worry – most retailers (Home Depot, Lowes, Home Base, etc) often run clearance sales on overstocked and discontinued models. I have found nice Delta and Price Pfister faucets for about $60 on sale. And don’t forget to check eBay!

9. Add Window Shutters

If you have ugly aluminum framed windows, consider adding wooden shutters outside. They come pre-primed at most hardware retailers and are easy to install. Paint them an offset color from the outside of the house – (e.g., if the house is dark, paint the shutters white. If the house is light, paint them green, blue, etc.).

10. Add a Nice Mailbox

Everyone on the block has the same black mailbox. Stand out. Be bold. For about $35 you can buy a nice mailbox. For about $60 more, you can buy a nice wooden post for it.

People notice these things and buyers love them! As a real estate investor in Tampa, FL or anywhere else in the world, staying mindful of these easy and cheap fixes can help your profitability soar.

Position Realty
Office: 480-213-5251

Traits to Look for in a Potential Tenant

Finding a good tenant is essential, but it can also be tricky. It requires more than just putting an ad on the internet. To find a great tenant for your rental property, it pays to know what makes a good tenant.

So, we’ve created a list for you. These are 8 traits to look for in a potential tenant.

1. Openness Toward Background Checks It’s important for you as a landlord to know who you are renting to before you rent out your property. This is because you never know when a tenant is going to be reliable and worthwhile or seriously problematic.

A tenant background check is important for the following reasons:
• To find out if they have a criminal record • To choose the best tenants from your pool • To check their work history • To make sure that they will comply with your rules • To confirm your tenant’s rental history • To know which questions to ask during screening • To confirm their identity

2. Reasons for Moving Tenants move for various reasons. For example:
• To change their neighborhood • They had problems with neighbors • A job change/relocation • The need for more space • They had problems with their previous landlord

Contacting their previous landlord isn’t 100% reliable, as some might throw an array of unjust accusations. The only option is to ask them directly. Granted, the tenant may lie but some of the reasons are quite straightforward and oftentimes completely honest answers.

3. Personal Behavior You should call up tenant’s previous landlords to ask how they were personally. Good questions to ask them include:
• Did the previous tenant pay the rent and on time? • Did they do a reasonably good job of taking care of the rental property? • Was the person disruptive towards neighbors? • Was the unit clean and in good order when the tenant left? • Was the tenant evicted?

4. Ability to Pay Rent This is a no-brainer. The prospective tenant should be able to pay rent without struggling. To verify whether they can afford the price of the rent, you need to look at their proof of employment.

Look for a tenant who has good job prospects and a steady, reliable income. A good rule of thumb is that the price of rent shouldn’t exceed 30% of the tenant’s income.

Some red flags to look out for include a person who has long periods of unemployment or if the person changes jobs often.

5. Cleanliness A good tenant maintains cleanliness. It’s every landlord’s dream to get a tenant who will take good care of your property. You obviously wouldn’t want a person who is going to let trash pile up on the patio or leave food remnants building up in the microwave.

You can get a better idea of the way they would maintain your property if you get a glimpse of their car or if they allow you to meet them at their current residence. You could also include a cleaning clause in your lease as well.

6. Subletting When you are a landlord, it’s important to protect yourself against as many potential risks as possible. This is the same reason why you have to do a proper tenant screening before renting out your property in the first place.

But should you allow a tenant to sublet? Subletting happens when an existing tenant lets all or part of their home to someone else.

Allowing subletting is risky. Some tenants want to sublet as a way to earn extra cash or to avoid paying rent on a vacant apartment. Also, there’s no guarantee that they would pay as much attention to the tenant selection as you did.

It would be counterintuitive to be okay with your tenant getting a couple of tenants of their own.

7. Roommates It’s important to know how many people are going to be living with your renter. The tenant might be planning to move in with their significant other or even their entire family.

Should you allow roommates, here’s how to do it smoothly while protecting your investment:
• Consider updating your occupancy limit • Be prepared to consider a unit switch • Be cautious about creating new lease terms • Require potential roommates to be screened as tenants

8. Plans for residence Your final layer of screening is a simple practicality test. If they have a job nearby, verify that your house is not an impractical distance away. If they have a family, check that there is a room for everyone in the home. If they have a pet, confirm that they are willing to conform to the pet clause in your lease agreement.

Generally, tenants will have an excellent plan for residence, but it never hurts to check.

If your prospective tenant possesses most of these traits, then they are a great candidate for a long-term renter. They will most likely keep the home in good condition, and that they will be responsible and well-behaved.

Position Realty
Office: 480-213-5251

Nine Landlord Tips You Can’t Afford To Ignore

This is a great time to be a landlord. Monthly rents have been increasing for years, vacancies remain at historic lows, and renters are paying down any loans you have on the property while your equity continues appreciating every month. All is good! Now is the right time to fine tune and improve your processes.

1) The landlord process begins with a thorough screening of tenants. Whom you allow to move into your property always makes a difference in how profitable your business will be. No landlord likes having a vacancy but allowing the wrong tenant to move in can be more costly than a vacancy. The problems that bad tenants can cause are countless. If it’s a multifamily residence, one bad tenant can cause good tenants to move out. Bad tenants can move bad friends in to create even more trouble. Of course, the damage they do to the property can easily exceed your rent profits, the security deposit, and cause you headaches to make repairs. Besides the obvious screening for criminal backgrounds and credit reports, always follow up on references. Require at least two previous landlord references and place more weight with a landlord that doesn’t currently have him or her as a tenant. A current landlord is likely to give a bad tenant a glowing report just to get them out of their rental property. Also make sure all adults living in the residence sign the lease.

2) Go beyond the standard rental agreement to set your own rules. Certainly, your Arizona has minimum requirements that must be met to rent a property. Usually, these apply mostly to the landlord. You need to have your tenants sign a set of rules that you require them to obey. Common rules include not disassembling vehicles in the parking lot, no excessive noise after 10 pm, the number of days a guest is allowed to stay overnight, etc.

3) Understand and enforce security deposits fairly. Arizona allow one and one half months rent amoutn for a security deposit. Always have a walk through with a new tenant and take photos of existing damage. Have the tenant sign and date the written description along with signing printed copies of the photos.

4) Keep the property in good repair. Failing to make prompt repairs can give tenants the right to move out without advance notice, to withhold rent, or to make repairs themselves, and deduct it from rent. Stay in control of your properties by requiring tenants to promptly notify you of needed repairs and then you promptly making the repair.

5) Maintain a secure property. The best tenants insist that the property be kept secure from criminal activity. Often this only requires good outside lighting and shrubbery kept cut back. Larger properties might add security cameras as an additional deterrent to crime.

6) Notify tenants before entering their dwelling. Tenants have a right to expect privacy. Arizona laws allow landlords to enter under emergency conditions but you must give 48 hour notice before entering for any other reason.

7) Give notice of any known hazardous conditions. For older properties, the most common hazard is lead paint. Even if you don’t know if lead paint is four or five layers down, it’s wise to give notice of the potential so that you don’t become liable for tenants’ (especially young children) health problems. You may have other hazards such as an old covered well.

8) Maintain enough insurance to protect your investment. You need rock solid insurance to protect you from injury liabilities, discrimination lawsuits, fire, storm damage, and much more. Now is good a time to review your coverage.

9) Resolve disputes promptly. Conflicts can arise over rent, noise, mold, repairs, and a plethora of other issues. When a tenant has a complaint, discuss it with them quickly. Attempt to put a resolution in place as soon as possible. Doing so can avoid rent being withheld, moving out without notice, or even having the issue escalated to attorneys and courts.

Position Realty
Office: 480-213-5251

New Tax Law May Encourage Home Rentals

The new tax law brought welcome news for people who rent out their homes for short periods. And it likely will entice even more people to do it.

To be sure, the tax rules are complicated and the Internal Revenue Service and the Treasury Department haven’t issued the final regulations yet. But here are some ways short-term landlords could benefit:

Property-tax deductions
The new tax law caps state and local income-tax and property-tax deductions at a total of $10,000; previously there was no limit. But there may be a way around this new cap for people who rent out their home or vacation property for at least 15 days a year, tax experts say.

Here’s how it might work in practice, according to Stephen Fishman, a legal writer and author of several Nolo do-it-yourself legal guides, including one on short-term rentals.

Let’s say you pay $1,000 a month in property tax ($12,000 a year) on a home. Under the new rule, if you live in the home all year, you’re only entitled to a $10,000 deduction. But say you rent it out for three months. You can deduct 25% of your property tax, or $3,000, on Schedule E for rental deductions and income. You can then deduct the other $9,000 you pay in property taxes on Schedule A for itemized deductions, allowing you to deduct the full amount of your property tax, Mr. Fishman says.

If you’re in the top bracket of 37%, the difference in the amount you could deduct in this example would result in a tax saving of $740, Mr. Fishman says. If you’re in the 32% bracket, it would be a saving of $640, and it would be a saving of $480 in taxes if you’re in the 24% bracket, he says. “It’s not a gigantic amount. But it is an additional saving that you would not otherwise have, and that will probably encourage people even more to do short-term rentals.”

Mortgage interest
The new law also caps mortgage-interest deductions for first and second homes purchased during 2018 through 2025. Under the new tax plan, you can only deduct mortgage interest on loans of up to $750,000 over that eight-year-period; the previous limit was $1 million.

However, “a rental property does not fall under those rules,” says Robert Gilman, a partner at New York-based accounting firm Anchin, Block & Anchin LLP. “On a rental property, you could have a mortgage of $10 million and deduct the full amount of the interest.”

“If the property is part rental and part residence, you can deduct the mortgage interest without limitation for the period of time that it’s a rental property—provided it rented for 15 or more days,” Mr. Gilman says.

Again, let’s use an example, courtesy of Mr. Fishman. Say you have a $1 million mortgage on a home you bought in 2018 on which you pay $60,000 interest annually. Only interest on loan amounts up to $750,000 is deductible, so you can only deduct 75% of that $60,000 as an itemized deduction on Schedule A, or $45,000. If you rent the home for three months or 25% of the year, you can deduct 25% of your mortgage interest, or $15,000, as a rental expense, not subject to the $750,000 limit. You get a $15,000 deduction on Schedule E, allowing you to deduct the full amount of your mortgage interest.

You can’t double dip, though, so if you claim a deduction on Schedule A, make sure you don’t also claim it on Schedule E and vice versa, Mr. Fishman says.

If you’re in the top 37% bracket, the tax saving from the difference in the amount you could deduct in the example above would be $5,550, Mr. Fishman says. If you’re in the 32% bracket, it would be a saving of $4,800; it would be a saving of $3,600 if you’re in the 24% bracket, he says.

Other deductions
Another benefit for owners renting out their homes is that the new law makes it easier than ever to deduct in a single year the cost of personal property like furniture or appliances used by renters, Mr. Fishman says.

Say you buy furniture or appliances for your home rental property. You can now deduct 100% of your tax basis (the cost times the percentage of the year the property is rented) in one year for purchases made during 2018 through 2022. In the past, you had to deduct the cost of the property over five or seven years, depending on the item—and all the items had to be new. Now they can be used as well, Mr. Fishman says.

Position Realty
Office: 480-213-5251

Source: Wall Street Journal

Disclaimer: Position Realty is not a tax accounting firm. Before implementing any ideas in this article you need to speak with your tax professional.

Selling An Investment Property? Read This First!

Recently, a family of my acquaintance were selling a condo that had been an investment property. They had owned it for five years, and it fetched a rent a third higher than the mortgage; however, it was in an old building that had had several expensive assessments, so the condo had not been cash-flow positive during that time. Plus, the property had nearly doubled in value, and the couple thought it was prudent to cash out, since prices in the area seemed to be softening. They started researching their options.

There are three reasons people like investing in real estate. First, it’s a great way to diversify a portfolio and build wealth. Second, average citizens can take out a mortgage to leverage their investment; this is a more exotic, less advisable option when it comes to securities. Finally, a piece of real estate can pay off in two ways: by appreciating in price and by bringing in rental income.

When spouses filing jointly sell their primary residence, $500,000 in gains is shielded from tax. But when you sell an investment property, as my friends were doing, you owe capital gains tax on the proceeds. This can take a big bite — the federal top rate is 20 percent.

However, there is a way to defer paying that tax. It’s called a 1031 exchange. It allows you to put off capital gains tax if you use the proceeds of the sale to buy other rental real estate.

Here’s what my friends found out:

In order to complete a 1031 exchange, you must engage the services of a firm that specializes in such exchanges before you close on the sale of your investment property. They will charge a fee to hold onto the money from the sale until you are ready to spend it.

After closing, you have 45 days to identify up to three “like kind” properties for the exchange. Like kind simply means real estate; in practice it can be anything from empty land to an apartment or a freestanding house. But it must be an investment property, not a timeshare, shares in a REIT, or a second home, and not renovations or improvements, either.

And, you have 180 days in total — or until tax day (with extensions) for the year your property was sold, whichever comes sooner — to close on the sale of one of those three properties. For example, if you closed January 1, 2018, the new property must be purchased by July 1. But if you closed in December 2017, you only have until April 15 of 2018, unless you get an extension on your taxes.

Now let’s do some math.

In order to get the full tax deferral, the value of the new property should be equal to or greater than the sale price of the old property. Keep in mind that you owe capital gains on the mortgage payoff, as well as the cash that comes from the sale of your original property. You can, of course, put some cash into a new property and keep the rest, known as “boot.” But in practice, if you go much below the sale price the tax advantage can be quickly eaten up by closing costs and fees. As a rule of thumb, if the boot, the amount you take home, is greater than the total capital gains, it’s not recommended to do an exchange.

The main issue that wards people off of 1031 exchanges is the time crunch on finding a suitable new property. It can be daunting if real estate is not your primary occupation. It would be best to research your options before putting your existing property on the market. In fact, you can do a “reverse exchange” by buying the new property before selling the old property — provided you are confident of selling it in time.

Position Realty
Office: 480-213-5251

Why Not Sticking to Your Late Fees is Hurting Your Landlording Business

A grace period is additional time given to the tenant to pay their rent before they will be charged a late fee or given eviction notice. For example, rent may be due on the 1st of every month, but the tenant has until, say, the 5th to make their payment. Grace periods can be anywhere between 2–“X” number of days.

Giving a tenant a grace period allows the tenant to spend more of their money instead of budgeting their money to pay the lease payment on time. With a grace period you will not be able to serve the tenant with an eviction notice until 5 days after the grace period. Most landlords have a mortgage on their properties so the longer it takes to evict a tenant is lost money paid to your mortgage company.

If rent has not been paid by the 1st, tenants will get a late fee, currently 10% of the lease amount. Additionally, we charge them an extra $10 per day after that until they have paid their rent in full. For example, on the 1st they receive a one-time 10% late fee after 5 PM, on the 2nd an additional $10 is added to the 10%, on the 3rd an additional $10 is added to the total, and so forth. Every day gets a little more expensive.

Stick to Your Late Fees—No Matter What

When your tenant pays late, it is vital that you follow through with the late fees. This bears repeating: It is vital that you follow through with the late fees. Don’t waiver, as the late fee’s sole purpose is to motivate your tenant to pay as quickly as possible. Take away that motivation, and good luck getting your rent—that is, until the tenant gets around to paying it. If there is one simple piece of advice in this entire book that you should listen to it is this: always follow through with late fees.

Let’s be real: The number one reason most tenants are late on their rent is not because of an emergency or some unforeseen necessary expense, but because of priorities. They are late because paying rent on time has not been made a priority. The best way to make timely payments a priority is by following through on the late fees. Tenants, and America in general, usually live above their means. In other words, there’s always more month than money. Therefore, every month requires sacrifice and prioritization of bills: food, clothing, rent, cable, a new TV, a game console, tattoos, medical bills, Starbucks—these are all expenses your tenant is internally trying to prioritize.

Naturally, the bills with the highest penalty for negligence are usually prioritized the highest. Those will be the bills that get paid first. So the question is, is the consequence for paying rent late greater than or less than the consequence of having the cable turned off or having to go without their daily coffee or smoke fix? Despite what tenants think, late fees are not about lining the landlord’s pockets. Late fees are designed to give rent a place of high priority because of the consequence. You may feel bad or think you’re being cruel by charging a late fee, but by following through, you are helping your tenant prioritize the most important bill they have: their housing.

This last month we had a tenant call us a couple days before her grace period was up to let us know that she had some unexpected expenses come up, wouldn’t have the full rent in time, and wanted to know if she could pay the rest at the end of the month. We told her we needed to follow her lease, and the lease says her full rent payment is due the 1st and late after the 5th.

Any rent not paid would trigger both late fees and eviction notice. Guess what? On the 5th her priorities suddenly changed, and she paid her entire rent payment. From past experience, this particular tenant knew that we take non-timely rent payments seriously.

The One Alternative

We do offer our tenants one alternative to the late fee penalty, but it requires their planning ahead and communication. We call it the rent extension, and it is not something we advertise to our tenants. However, if a tenant calls us before the 1st to let us know they will be late on their rent, we will offer them a rent extension up to the 10th for a $20 penalty. If they don’t follow through on the 10th, they are hit with the full late fees and eviction notice. The reason for the rent extension is to reward responsible behavior:

1) They planned ahead to deal with the problem,
2) They communicated, and
3) They initiated the communication, rather than waiting for us to call them once the rent was already late.

Position Realty
Office: 480-213-5251

Fraud Alert: Fake Checks Used for a Variety of Costly Scams

Despite what you might think, it isn’t easy to spot a counterfeit check. Fraudsters know how to make a fake check look completely legitimate — so good that even a bank teller can’t spot it.

That’s why fraudsters are using fake checks to commit all sorts of scams, including security deposits, phony prize awards, fake job offers, mystery shopper scams, and bogus online classified ad sales.

“This scam comes in many different variations” said John Breyault, who runs the National Consumers League’s Fraud.org website. “But the key thing that binds them all together is the use of a fake check. The consumer is instructed to deposit that check into their personal account and then send a portion of the proceeds to someone right away.”

Most victims are instructed to send the money via a wire transfer service, such as Western Union or MoneyGram. But some are told to buy prepaid debit cards or iTunes gift cards that they can use to buy things.

When the bank discovers the check is counterfeit — which could be days or weeks later — that deposit is removed from the victim’s checking account. The crooks already have their money and the poor consumer is left holding the bag.

Earlier this year, the Better Business Bureau released a list of the Top 10 Most Risky Scams based on an analysis of complaints collected through its online Scam Tracker. Fake check scams came in at number two, just behind home improvement scams. That ranking is based on how many people are targeted by the scam, how likely they are to fall for it and how much money the average victim loses.

“This is definitely a very, very serious concern right now,” said Emma Fletcher, director of scam and fraud initiatives at the BBB Institute for Marketplace Trust. “The typical loss to a scam that’s reported to us is about $275, but with fake check scams the median loss is almost $1,500. That’s a lot of money.”

While anyone can fall for a fake check scam, the BBB’s analysis shows that men between the ages of 18 and 24 are the most susceptible. This is also the top scam for students, and military families and veterans.

These Crooks Are Clever
Fake checks are commonly used to steal money from people who want to become mystery shoppers. Kathy, who lives in Dallas, Texas, got taken for $2,650 this way. She asked that we not use her last name.

“What these crooks are doing is disgusting, absolutely disgusting,” Kathy told NBC News. “They’re really clever and they need to be brought to justice.”

Kathy had done mystery shopping before, so she wasn’t surprised to get an email from a mystery shopping company asking her to do some work for them.

“The email seemed totally legit and everything on the website seemed on the up and up, so I didn’t question it. There were no warning signs,” she said.

Kathy’s first assignment as a “survey agent” was to rate money transfer companies. The mystery shopper scammers sent her a check for $2,850 and emailed her a list of questions to fill out about her experiences.

“It was a cashier’s check and it looked totally legit,” she said.

Kathy was told to deposit the check, take the cash and go to three different money transfer services and wire $900 from each. That left her with $100 for doing the job. She did as instructed.

About a week later, Kathy got a letter from her bank. It said the $2,850 check was counterfeit and couldn’t be cashed, so the money she had withdrawn would be debited from her checking account.

“The bank should have been able to determine immediately whether the check was legit or not and they didn’t. And that really disturbed me,” she said.

Kathy realizes she’ll never get that money back, but she hopes that by sharing her experience she can prevent others from becoming victims.

Why Fake Check Scams Work So Well
Few of us understand how the banking system works and the scammers use that confusion to trick us.

When we deposit a check, the financial institution is required by federal law to make the money available to us long before it can be certain the check is legitimate. We see the money show up in our account and assume the check is good and has cleared.

Fake check scam victims frequently report that their financial institutions decline to help them.
But that’s not what really happens. It may take a couple of days or a week or more for the check to work its way through the banking system and actually clear. During that time period, the bank gives us a short-term, no-interest loan using that check as collateral. If the check bounces, we have to pay back that loan in full.

“Unfortunately, you don’t realize you’ve been defrauded until you find that your bank account has a big negative balance,” said Fraud.org’s John Breyault. “And because of how our banking laws are written, it’s the consumer who’s on the hook for that — not the scammer and not the bank. It’s not like a fraudulent transaction on a credit card that you can dispute. It doesn’t work that way with personal checks.”

Victims Say the Bank Wouldn’t Help Them
People who’ve lost money to fake check fraudsters frequently complain that their bank teller did not warn them about the scam and their financial institution would not help them when the check turned out to be bogus.

Erika, a single mom in Oklahoma City who preferred not to be identified by her last name, was excited to be offered a work-at-home job this past spring. Her new employer sent her a check for $1,000 to buy office supplies and cover her first paycheck.

Erika was told to cash the check at her bank, take $979 to another bank in town and deposit it into the account of a corporate vendor who would ship the supplies she needed to get started.

A few days after she did that, Erika got a call from her bank. The check was a fake and there would be a $979 debit to her account. Not only that, but the debit caused her account to be overdrawn, which meant in addition to the $979 stolen by the scammers, she now owed the bank overdraft fees.

“I’m looking for a job, so I can provide for my three year old son, and instead I get fleeced,” she said.

Erika told NBC News she asked the bank if they could help her with this, but she was told there was nothing they could do. That’s not uncommon. Fake check scam victims frequently report that their financial institutions decline to help them.

The nation’s bankers insist they take fake check fraud very seriously and are doing a better job of spotting it and stopping it. For example, the American Bankers Association said tellers are trained to say something and ask questions when they see a transaction that appears to be suspicious.

“These losses are not something that bankers ever want to see,” said Doug Johnson, ABA’s senior vice president of payments and cyber security. “We continually educate our customers about the frauds being perpetrated against them, but we can’t stop every crime.”

That’s why it’s up to you to protect yourself and understand how scammers use fake checks to steal your money.

The BBB’s Emma Fletcher told NBC News she cannot think of any legitimate business transaction where someone would send you a check, ask you to deposit it and wire back the money.

“Any time you’re asked to do something like that, an alarm should go off that this is a scam,” she said.

The Federal Trade Commission has information on Fake Check Scams and the Better Business Bureau provides 10 Steps to Avoid Scams.

5 Tenant Red Flags Landlords Should Look Out For

Landlords can sometimes get a bad rap for being ruthless, money-driven tyrants. The truth is, many landlords do a great job at keeping their tenants happy and, in return, reap the benefits of these people being taken care of. There is a downside for you as a landlord, though, and that occurs when you have not screened your tenants as well as you should have. Even with a proper screening, bad apples can occasionally sneak through, and that’s why it’s important to know the signs of a bad tenant. Read on for five red flags you need to look out for as a landlord.

1. Bad Landlord References
One of the most important things you can do is to call past landlords, as you want to know their history of payments, how they treated the rental property, etc. If the past landlord tells you there was an extensive history of late payments, damage done to the property, or, far worse, an eviction, this should be a giant “no” in your book. This is particularly true if these have been recent. If the bad behavior was far in the past and they have since had good reports, this is up to your discretion, but still be wary.

2. Bad Credit And/or a Tax Lien
Good Landlord 101 includes running a credit check, as knowing how (or if!) they pay their bills is key in deciding whether or not to let them live on your rental property. How landlords read credit reports is also crucial, so if you’re new to doing so, get some help from a company like TransUnion and do your research. Bad credit is a huge red flag and could indicate that they will have trouble paying their rent—tenant screening can save a huge headache. Of course, if the IRS can’t get money from them (hence the tax lien), how do you expect you will do the same? You definitely do not want a squatter!

As for the nitty gritty of credit numbers, be wary of anyone with a credit score of less than 620. As this GreenResidential.com article notes, “A low credit score can be indicative of many things: problems with budgeting, holding down a job, or taking on too much debt. Whatever the reasons, avoid these tenants at all costs.”

3. Criminal History
You are well within your rights to run a background check on your potential tenants. If your gut instinct tells you that this is a solid person and his or her credit check and references turn out okay, you might consider ignoring any minor offenses. However, someone with a major criminal history is obviously someone you don’t want living under your roof, especially if you have other renters in the vicinity.

4. Gaps in Employment And/or Low Income
Your application should include a pretty extensive list of their past employers and how much they have made at each job. Long gaps in history could be an indication of flakiness and low income. You also want to be wary if they make very little money at their current jobs, as you have to weigh the rent vs. this amount of money. If it doesn’t seem to add up, it’s a red flag. Of course, you could ask that someone co-sign for them so that you have someone to recoup the money from him if you need to. That’s something that’s left to your discretion and many landlords will go with their intuition on this.

5. Awkward Behavior During the Interview and Negotiation Attempts
Again, we can’t stress enough the importance of gut instinct. If the person seems overly nervous during the interview and can’t hold eye contact, it could be a red flag. What are they hiding? If there are gaps on their application and they can’t answer many questions during the interview, they could be hiding be a giant secret (or secrets!).

Attempts at negotiation of monthly rent and/or deposit amount don’t have to be huge red flags, but they’re not great signs either. If you know your rental property is fairly priced, stick to that number. Negotiation could be a sign that they are not able to pay this amount on a regular basis.

Position Realty
Office: 480-213-5251

The 5 Most Common Reasons Tenants Leave Your Rentals

Why are renters leaving your units? What can you do about it?

Tenants are on the move. What are the most common reasons they may leave your rentals? How can landlords prevent these moves to keep good tenants, maintain consistent cash flow, and maximize cash flow?

The 5 Most Common Reasons Tenants Leave Your Rentals

1. They want to move somewhere cheaper.
Housing costs, especially rents, have been rising for the last five years. Some are just at the point where it makes sense to move somewhere cheaper where renters can get a lot more for their money. It could be that local rents have just gotten too high—or maybe your rents, in particular, are too high.

Market rents change over time. Be sure you stay tuned into local trends, even when you aren’t actively looking for tenants. If neighboring properties are leasing for 30% less than yours, that could become an issue. Price your properties right. Invest in stable and upcoming locations with more room for growth.

2. They’re afraid of changes in the rental situation.
Sometimes tenants leave just because they are afraid. They may be afraid of how much they think you are going to raise the rent when it comes time to renew. They could be afraid you are going to evict them because they’ve fallen a few days behind on rent a couple times. Or it could be that a tough new property manager you’ve brought in is causing panic in the renters.

Set clear expectations. Get feedback from loyal, long-term renters you trust when you bring in new management, connect with them about renewing leases early, and maintain property upkeep to show tenants you’re a caring landlord, not a slumlord.

3. They need more space.
Between a growing number of multigenerational households and Millennials’ growing families, many simply need more space today. A lot of people jumped on the minimalist lifestyle after 2008, but now, years later, they are tired of living so tightly and cramped. In fact, a Realtor.com survey shows that this is driving far more Millennials and Boomers to choose single family homes in the suburbs over homes in dense urban centers or condos.

4. They want to buy a home.
With rents more expensive than mortgage costs in many areas, interest rates low, and credit scores recovering, many are making the leap to buy homes while it is still so attractive. If you can’t stop it, make the best of it. Ensure a good exit service. Return deposits and ask for a review on the spot. Still, if you can, get them to buy their home from you.

5. They don’t like the neighbors.
No one likes scary or abusive neighbors—and they are out there. This is something to keep in mind when searching and screening rental properties. It is also important to keep lines of communication open and to listen to these complaints. If there are problem tenants in your own neighboring units, you probably won’t renew their leases. If they belong to another landlord, you may want to preempt issues by contacting the other landlord.

Summary
There are a number of reasons good tenants can leave, even if they like the units they are in. Smart landlords will get out in front of these issues and find ways to keep those tenants in their property to avoid turnover costs.

Position Realty
Office: 480-213-5251

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