Tenants are the lifeblood of the landlording business. But as landlords, we don’t want just anyone as our tenants. We want good quality people who will pay, stay and respect our properties. We want tenants who will not cause problems, either to us or to our other tenants. We landlords already have enough problems to deal with, and the last thing we need is to add to those by selecting a tenant that will make numerous unreasonable requests, burn up the phone lines or just be a general pain.
Tenant screening is one key to finding good tenants. Another key is being aware of characteristics that can signal a potential problem. Over the years, experience has shown that there are several characteristics landlords should beware of and that are worthy of further investigation. I’m not saying that the following characteristics always present a problem, just that years of experience have taught me to look deeper and be a bit more cautious.
7 Types of Tenants Who Cause MAJOR Landlord Headaches
The storyteller has always got to explain things before he answers your questions. Even the simplest questions that should require only a yes or no answer come with a long and convoluted story. For example, if you were to ask, “Have you ever been evicted?” instead of a yes or no answer, you are like to get a response such as, “You see there was this time when my roommate…”
Be careful with the storyteller. Listen to the stories if you want to, but understand that the storyteller often thinks they can gloss things over and smooth talk their way into your property. Beware and don’t fall for it.
The Momma’s Boy
You know the type — the child who just can’t seem to cut those apron strings. Despite being 30 years old, they have never really made a decision on their own in their entire life and have not had to. Mom (or Dad) has made all of the decisions for them. This type shows up to apartment viewings, lease signings and other appointments with mom and/or dad in tow. They never talk to you; rather, mom does all the talking, negotiating, etc.
Does this mean mom and dad coming along is always bad? No. But you can usually tell the child who is trying to spread their wings from one who has been coddled all their life. Beware of this type of applicant. Have they ever held their own job or been on their own before? They often have no clue how to live on their own or how to manage their lives. They and their mom could be a load of problems down the road.
The Spoiled Deadbeat
This type also has mom and/or dad in tow, but they are really excited to tell you how wonderful their kid is and how great a tenant he or she will be when the kid is indifferent and unengaged. The parents offer to pay the deposit, co-sign, anything to get you to rent to their wonderful kid.
Beware. There is potentially something wrong that they are trying to dump on you. Most likely they just want them out of the house. But you have to ask yourself why. What is wrong with this kid? Perhaps it is nothing. Or perhaps the kid is a lazy deadbeat.
We have all had a perfectionist in our lives at some point. They drove you crazy, didn’t they? Nothing is ever good enough. Do you want to let one live in one of your properties? Will anything ever be right for them, or will they constantly harass you with phone calls about this little thing or that little thing? Beware of the perfectionist.
The complainer often shows up and very quickly lets the tongue start flapping: “My last landlord never fixed anything.” Or perhaps, “The property was never maintained, and the other tenants were trashy.” “Will that be fixed?” “This room is really small.” “Who lives next door? I don’t like a lot of noise!”
The complaints go on and on. And they likely will go on and on if you let them in your property. A bit of complaining is normal. But beware of anyone who complains too much.
The All Cash Dealer
The all cash dealer looks and sounds really good. They wave a lot of cash in front of you stating that they can pay the deposit along with first and last month’s rent today. They might even say they want to pay a year’s rent upfront. Sounds great, right? But you have to ask yourself why they are doing this.
Sure, there could be a multitude of legitimate reasons, but it is not normal. Paying a year upfront is not how things are normally done. Could they be trying to hide something? Maybe, maybe not. Again you need to beware. Plus, think about this — how do you evict someone who has paid a year of rent upfront if things go south? It is possible, but a bit more difficult.
The Space Cadet
Ever have someone get lost five times while trying to make it to a showing? Could they never seem to get the correct address or the correct time to show up? You might be dealing with a space cadet, and again, you need to beware of letting this person into your life. Can they remember to pay the rent on time, or will you constantly be calling them? Will they be able to care for your property? Again, the answer is maybe or maybe not. You just need to dig a little deeper to be sure they are nothing more than a bit directionally challenged.
Remember, I am not saying that folks displaying these characteristics should automatically be disqualified. What I am saying is that you need to be on the lookout for these characteristics, and if you see them, beware. Check out the stories, review the cash dealer’s background, talk to the complainer’s previous landlord and current boss. Remember that rudeness and promptness can count. Remember also not to discriminate against the protected classes and to have your selection criteria written down and on file.
What characteristics do you look out for? What makes you say “no way?”
BY KEVIN PERK ON FEBRUARY 9, 2015
This is a guest post from Holly Johnson. Holly is a 32-year-old wife, mother of two, and frugal lifestyle enthusiast. She blogs about saving money, frugal habits, and whatever is on her mind at ClubThrifty.com.
In 2006, my husband and I bought our first rental property. We put 10 percent down ($8,500) on a small brick ranch in the same Midwestern community that we call home. I had gotten my real estate license several years prior, so I had some basic knowledge to build from. We still weren’t 100 percent sure about what we were getting into, but we thought that it would be a great opportunity to build long-term wealth. We also hoped that the home would provide a passive income stream for us once it was paid off. A few months later, we converted our starter home into our second rental, and we bought and moved into our third home, where we currently reside.
So, there we were – 27 years old, with two rental properties and high hopes that everything would turn out as planned. Another landlord we know gave us a copy of his lease to use, and we got lots of advice from other friends who own rental property. We placed ads in the local newspaper and signs in the yards of both homes. Luckily, they both rented out quickly for the amount that we asked without much effort. We were young, dumb, and in love…and we thought that we were real estate moguls!
However, the truth was quite different than what we had pictured. Soon, we found out that owning rental property requires a lot of hard work, patience, and planning. Being a landlord wasn’t turning out to be the glamorous hobby that we envisioned at all. Still, we were excited about the future and moved forward in our new role as landlords.
Owning rental property is a great concept for building wealth. On our end, it required a cash down payment and will require years of cash support via repairs, upkeep, and major component replacements. At the same time, someone else is paying off a property for us. Once the homes are paid off, we will have two additional income streams to add to our earnings from our 9-to-5 jobs. Even after paying for repairs, the cash flow will be significant and will (hopefully) help us reach an early retirement. We often enjoy months at a time without thinking of the properties at all. Additionally, our properties generate a small amount of side income, though at this point we use the additional funds to accelerate their payoff.
Holly’s first home, which became her first rental.
There are times when it is smooth sailing, but that is not always the case. Owning rental property can be a ton of work. It takes patience and the ability to deal with many different personality types. Each time one of our properties becomes vacant, we have to place ads to find a new tenant. Sometimes searching for a new tenant can bring a lot of shenanigans. For instance, we have had people lie on their application about their employment or credit rating. Others have been completely dishonest about having a job at all. After checking one person’s application, we found that they had multiple evictions on their record. Obviously, we didn’t rent to that person!
Even after you find a qualified tenant, sometimes problems will still occur. Some of our tenants have been habitually late paying their rent. We have a late-fee stipulation in our lease, but we have never charged anyone. We simply don’t need the added drama, although we are probably just perpetuating the problem. Still, as long as they pay within a few days I don’t get too worried about it. We just choose to pick our battles.
The good news is that the majority of people we have rented to have been absolutely pleasant. At the same time, just like with anything else in life, there are a few bad apples mixed in to give renters a bad name. Speaking of bad apples…
Occasionally, being a landlord means living out your own landlord horror story. In 2010, one of our tenant families was nearing the end of their lease. We hadn’t been called recently and – therefore – hadn’t been at the house for many months. However, I happened to drive by one day and noticed that something about the house looked really strange. I drove by again and still couldn’t put my finger on it, but we would soon find out.
A few weeks later, the tenant called and wanted to arrange a meeting. We arrived at the house and walked toward the front door. As we approached, I realized why it looked so weird: The picture window on the front of the house had been replaced with a different window! I knew that this wasn’t a good sign. Apparently, they had broken it somehow. Instead of calling us, they found a salvaged window of the same size and installed it themselves. The old and wooden frame didn’t match the newer vinyl replacement windows, so it stuck out like a sore thumb. Unfortunately, that was the least of our problems.
Upon entering the house, we realized that the drywall in almost every room had giant holes punched in it. The carpet, which had been new when they moved in, was stained beyond recognition. All of the interior doors in the house were missing … gone. The refrigerator was missing. Someone had busted in the front door, and the entire door frame had been hastily and obviously glued back together. The house was an absolute disaster area, and the tenant had asked us for a meeting in order to resolve the issue.
After some discussion, the tenant agreed that he would pay for some of the repairs to the home in order to avoid getting sued. We spent the next month and almost $7,000 repairing all of the damage. After another friendly meeting, we reached an agreement with the tenant and he repaid approximately $3,200 toward the damage that his family had caused. He didn’t pay for all of the repairs, but we were still satisfied and ready to put it behind us.
Luckily, we reached an amicable agreement with our tenant and everything turned out fine. However, we lost more than just money. While most people were celebrating the holidays, we spent the entire month of December repairing that home. Did I mention that I was pregnant at the time? Still, I had to spend my days stressed out at work and my evenings crying and painting at the rental house. I had no choice. For close to a month, the situation consumed our whole lives. We were so glad when the home was finally fixed up and ready to be rented out again.
I think back to the days when we acquired our rental properties and wonder what we were thinking. Did we really think it would be easy? Were we that naive? Did we have a long-term plan at all?
Luckily, I don’t worry about it too much. I don’t regret buying our properties, and I think it was one of the best decisions we have ever made. While being a landlord can be stressful and expensive, I believe that the future rewards will be worth it. Our two rental properties will be paid off in approximately 14 years…right in time for our two small children to begin college. We could use the rental income to pay for our children’s education. We could use it to pay for their living expenses while they study. If they go to college nearby, we could even provide them with a free place to live while they pursue their schooling. Once our kids finish school, the nearly $2,000 per month in rent will be ours to save or invest. The possibilities are endless.
Owning rental property can be stressful and difficult. It can test your patience and even your faith in humanity. Yet, I think it is definitely worth my time and effort. While it certainly isn’t as passive as we imagined, I believe that our properties were a great investment and have no regrets at all. Is it worth it? I say yes.
3 tips for first-time landlords
1. Use your intuition. We have been advised by others to never rent to anyone with bad credit. We feel differently and tend to rent to people with bad credit as long as they are up front about it. I’m glad that we listened to ourselves because our best renters have all had terrible credit.
2. Keep your house nice. Saving money is a good thing, but don’t do it at the cost of your renters! If something breaks, have it repaired quickly and correctly. Between tenants, make sure that your home is clean and in repair. A nice clean home will attract renters who will work hard to keep it that way.
3. Have a large cash cushion. Owning rental properties means that you have more liabilities. You have more than one air-conditioner, furnace, refrigerator, and roof to worry about. You need to have enough cash to cover the cost of replacing all of these items. If you don’t have a large enough cash cushion, you should probably wait to buy rental property until you do.
Have you ever considered buying rental property? If you already own rental property, do you think that you made a good investment?
I get the question a lot: I am thinking of moving or upgrading… do I rent or sell my home?
That question is really loaded. A simple yes or no answer doesn’t really do the question justice. Honestly, anything shorter than an article really can’t answer the question and does you the questioner a disservice.
Therefore, this article is for all of you who have thought, asked, or wondered about this conundrum.
Before We Get Started.
Let me preface this whole discussion by saying: It really depends on YOU! No matter what is said in this article — or any other forum, newspaper article, etc. — at the end of the day, it is what YOU are comfortable with and willing to do. Think of it like stocks: while you can make a killing in the penny stocks, you have to be comfortable with your financial decisions — because at the same time, you can lose your shirt!
Any investment that entails the use of a “vehicle” to obtain your dreams is going to have its up and its down days. If you don’t fully believe and aren’t invested in it to succeed, you will be not be a successful landlord. Going into this half-hearted means you won’t be willing to go the extra mile to stay out of landlord trouble, deal with tenant stress or any of the other wonderful “consequences” that come with being a landlord. On the other hand, if you choose not to go in this direction, you won’t be able reap the amazing rewards that come with being a successful landlord.
Lets Get Started: Do I Rent Out or Sell My House?
Here are some questions you need to ask yourself:
Are you willing to be a landlord?
Being a landlord isn’t fun, and it definitely has its moments. For us, they have only been in the form of emotional, not financial, stress. That is draining and never seems to be at a good time. We have had tenants break lease during a move, right after my husband deployed, and we’ve had a house leak during our vacation — to name just a few of the “fun” situations of landlording. While the rewards have been amazing, they are slowly realized, so patience is a must.
Are you going to make a profit or bring money to the table?
If you bring a profit to the table, make sure you have assessed the true profit after real estate agent fees and capital gains. If you are bringing money to the table, make sure it is an amount that is worth it to you!
What is the TRUE cost of bring money to the table?
Frequently, I see calculation of the costs of having a home based on vacancy, management, and maintenance costs. If the only reason you are selling is for monetary purposes, make sure you are looking at the costs. While long term you might have vacancy and management costs, I have been able to eliminate these costs. My houses’ margins are $120-$450 a month, and I have NEVER had to raid my pocket to pay for anything. So before you shell out $40,000, figure out how long it will take you to break even! It might not be as bleak as you think. Remember, if you can afford it, there is nothing wrong with trying the rental thing and then selling it if it doesn’t work out.
For example, if you are losing $100/month, that’s $1200/year. If it costs you $40,000 to get rid of it, it would take 33 years to break even. That’s a lot of “extra” cost that would have to appear to make it worth the $40k! Plus don’t forget about deprecation and other tax “credits.” Just food for thought!
Are you looking for cash flow or payout?
Life requires flexibility; business success requires a plan. Create a plan that reaches your long term goal. Our long term goal is early retirement for 15 years. While our plan when we started 3 years ago looks NOTHING like what we are doing today, we still are on path for our goal!
Do you have a better place to invest the proceeds?
Congratulations, you can make $20,000 if you sell the house! Now for the hard question: what are you going to do with it? I could sell all of my houses for a profit, but I couldn’t reinvest them into other assets that give me the same return long term. My goal is long term cash flow for early retirement. So before you sell, make sure you have an reinvestment plan that maintains your LONG TERM goals.
Is the area depreciating or appreciating?
I recently sold a house for family and 1031-ed it into 3 houses in California. The area was depreciating. The house was older and had an oversupply of brand new condos for rent. While the sales market was still in a good place, it wasn’t going to be there forever. So this was the perfect time to jump ship.
Look at your market. Where do you see it going? If you see the writing on the wall, this is the time to leave.
I am buy and hold landlord who has turned personal properties that are highly leveraged with low margins into great rentals. So of course I am biased when I advise someone to keep their house as a rental.
Just remember that once you have a mortgage, it’s yours; there is no re-qualifying later. If you sell now, you have to re-qualify for the new house. While you might qualify for a new house, you might not qualify for 2 new houses. Rates are not at the lowest they have been in history, so if you have some of those amazing 3.125% rates, you might not want to sell. Just remember: look at EVERYTHING before you decide to sell!
Weigh in: What questions would you add to my list? What do you consider when trying to decide whether to sell or rent?
BY ELIZABETH COLEGROVE ON DECEMBER 29, 2014
Possible Top Property Investment Market in South East Asia
Top Property Investment Market
When we speak of top property investment markets in Asia we would inevitably think of the following countries,
2. Hong Kong
In Hong Kong, authorities at the start of the year introduced a new round of transaction taxes and raised down payment requirements for both the residential and commercial sectors.
In Singapore, the government’s four-year campaign to curb home prices continued with a further round of transaction tax increases, together with a new policy tool that caps total consumer debt available from banks at 60 percent of borrowers’ incomes.
The measures have had a chilling effect on residential transactions in both cities, particularly at the high-end property segment.
Faced with an overheated property market that could foment social unrest, the Chinese government has implemented a combination of measures in what some are calling a belated response. The impact, however, is reflected in sharply declining property sales in cities like Beijing and Shanghai.
In view of a relatively healthy economy and the possibility of sustained capital flow into Asia, it is likely that the cooling measures will be intact to stabilize markets to avoid social unrest caused by soaring residential prices in these countries.
So where are the investment opportunities for property investors?
Top Property Investment Market - sgpropertyinvestors.com
Let us first look at the location of these cities in the Asia Pacific region. Of those 11 attractive cities listed, 3 of them are located West of Asia.
They are the following 3 cities in India.
Located in the North of Asia are cities like,
1. Osaka, Japan
2. Seoul, South Korea
While located in the South of Asia are cities like,
1. Melbourne, Australia
2. Sydney, Australia
3. Auckland, New Zealand
While those attractive cities found in Central Asia are,
1. Kuala Lumpur, Malaysia
2. Jakarta, Indonesia
3. Ho Chi Minh City, Vietnam
What does this imply?
Everything being equal, KL, Jakarta & Ho Chi Minh City enjoy geographical advantage over the other cities in the North, South and West regions of Asia.
As KL, Jakarta & Ho Chi Minh cities are located in the central region of Asia, travelling and accessibility to other parts of Asia is within a shorter (3-8 hours) flight away offering time saving. This makes it attractive for companies to operate their businesses out from these cities for cost saving and ease of accessibility to other markets in the region.
Air Passengers and Cargo Handled
The figures below showed the KL airport handled one of the most passengers and cargo in Central Asia.
According to the Emerging Trends in Real Estate Asia Pacific 2014 (ETREAP) by PwC and Urban Land Institute above, the following countries are top markets for property investors in the coming 2015.
Of these cities Mumbai appears to be the most attractive market. Up 12 places from 23rd to 11th in 2015. What is your take? Which city do you think would be an attractive market?
Where are the Top Property Investment Markets
While Mumbai, Melbourne, Seoul, Osaka look like very attractive property investment destinations in 2015, but how will your property perform in 5 years time? How will the market perform in 10 years time vis-à-vis the market in the region? What is the market earning potential?
We now analyze all these cities listed and see which city offer a more attractive investment opportunity for investors in the mid to longer term.
Looking carefully, you will realize the economy situation in these cities is different. Some of these cities have a more advanced economy, whereas some are emerging markets. We separated the cities below reflecting their respective economy situation. Most of us will agree because of higher costs, growth rate in the advanced economies are less likely to grow on a higher rate. Unless the properties are really undervalued in the advanced economies, chances are we are to see better possibility of profitability when investing in countries with lower property prices.
The Global Competitiveness Index
The Global Competitiveness Index 2013–2014 rankings by the World Economic Forum ranks Malaysia 24 position after Singapore (2), Hong Kong, Japan, Taiwan & Australia out of 148 countries. The report notes,
“Malaysia advances one position to 24th. Second among ASEAN countries, behind Singapore, Malaysia ranks no lower than 51st in any of the 12 pillars of the GCI and features in the top 10 of two of them. Its most notable advantages are its efficient and competitive market for goods and services (10th), its well-developed and sound financial market (6th), and its business- friendly institutional framework (29th). In a region plagued by corruption and red tape, Malaysia stands out as one of the very few countries that have been relatively successful at tackling these two issues, as part of its economic and government transformation programs. The country, for instance, ranks an impressive 8th for the burden of government regulation, although the score differential with the leader, Singapore, remains large. Malaysia ranks a satisfactory 33rd in the ethics and corruption component of the Index, but room for improvement remains. Furthermore, Malaysia ranks 15th for the quality of its transport infrastructure, a remarkable feat in this part of the world, where insufficient infrastructure and poor connectivity are major obstacles to development for many countries. Finally, Malaysia’s private sector is highly sophisticated (20th) and already fairly innovative (25th). All this bodes well for a country that aims to become a high-income, knowledge-based economy by the end of the decade. Amid this largely positive assessment, the government budget deficit, which represented 4.3 percent of GDP in 2012 (103rd); the low level of female participation in the workforce (121st); and the still comparatively low technological readiness (51st) stand out as some of Malaysia’s major competitive weaknesses.“
Malaysia is still an emerging economy. The potential for growth is higher than those of the more advanced economy where costs are already relatively high and served as an impediment for higher growth rate. Infrastructures are still under development in the country, and it is undergoing modernization. E.g. is the construction of the High Speed Rail connecting Singapore to KL City and others. Such major infrastructure development will definitely have a positive impact on the Malaysian economy in time to come. Coupled with a natural advantage of its geographic location and a huge pool of highly qualified workers, Malaysia’s trade/commerce growth rate is very likely to see better result as compared to the other countries in the region in the next few years.
Next, property prices in Malaysia are still relatively cheap as compared to the more developed neighbor, Singapore. For example, a ultra high-end residential property would cost about S$3500 psf or more in Singapore. While a commercial retail outlet or shop in the prime area can cost up to S$15,000 psf or more in Singapore. However, prime residential unit in KL City it is about S$1500 psf, 1/3 of the price of one would pay in Singapore. This is where Malaysia can be a good alternative investment market. Malaysia has escaped property investors’ radar for a sometime now. Although investment, political, social and economic risks do exist, they are relatively lower than some of the newly emerging markets. In additional, when one compare the price of property around the region, in our opinion, Malaysia can indeed fill the void left by some traditional property investment hot spots.
However, we are not suggesting you to invest in any property you may find in Malaysia, for 2 main reasons.
1. It is a big country. In the absence of proper land use planning and a concerted effort to bring in demand for the properties, the glut of properties supply may easily out strip demand by many folds.
2. It has relatively much smaller expats community. Hence rental income may be compromised.
What do you think?
Malaysia is a huge country which city is growing? Which city should you invest in? Please follow us to find out which city in Malaysia is an attractive investment spot.