All Forum Posts by: Randall Alan

We have the 3x as a standard as well, but not everyone fits the mold, right?  So what we do is mitigate the income risk.  How, you ask?  We ask for an additional month's rent as a part of their prepaids.  So if you just do security deposit and first month's rent up front, you tell them, "due to not meeting the income requirement we would require last month's rent as well... whatever phrases right for the situation. If you already do first and last month's rent, you just say "an additional month's rent".   I learned this technique from a landlord who actually charged 3 month's advance rent to his tenant because the guy couldn't verify his income etc.   It's all about mitigating the risk.  Look at the tenant, ask yourself what you are concerned about, then ask yourself, "What would I need to rent to this person?"  Cosigner works as well, but extra rent in the bank feels better to me.  If they get to 30 days late, you start the eviction process and still have the extra month's rent to compensate you for the month it will take to get them out of the unit.

So we have a late fee, then a daily fee after that for the next 10 days.  We also have a clause that says "If you are late 2 times during a lease period we reserve the right to raise your rent by $100/month for the remainder of the lease.  Essentially, we are going to help them decide that they shouldn't be living in our unit if they are going to be a slacker when it comes to paying their rent.  

 Ultimately, you need to decide how long you will tolerate how they "prioritize" their rent expense.  Once they get the picture that "Unless I pay my rent on time it gets really expensive very quickly!" Most will treat it like their most important bill and pay it on time.  If you let them waffle and push you around then it is you who is the victim.  DON'T BE A VICTIM!  It's your rental, not theirs!  If they won't straighten up and fly right, "Its time for them to go!"   Yeah, it will cost you a month's rent and fees, but it's sort of like ripping off a bandaid... its painful when you have to do it, but then you get a new tenant that will pay their rent and you are MUCH happier!  I've never been sad that I evicted someone.  They had their chance.  They abused the chance, and my generosity.    :)

As for collecting rent, we use an automated system to collect rent, which about 90% of our tenants use.  No mailing checks, 'lost' mail excuses, etc - money gets ACHed directly to our account.  We get emails when tenants pay, as well as when their payments bounce, etc.  We use RentecDirect and love it. For the ~$3/door it costs us per month, it does a whole lot... markets our vacancies, screens tenants, collects rent, tracks expenses, web portal for tenants to pay, lets tenants report repair needs, etc, etc.  Can't say enough great things about it.  

I concur with Chrstine's approach... you could also 'soften up' the end of it by closing it with something like, "...while we don't have any available units at this time, I would recommend checking with <the name of a couple of big rental agencies in your town>.  That way you give your tenant somewhere to turn for h elp... depending on how savvy your tenants are they may really appreciate some direction on what to do - especially depending on how long they have been in the unit.

You have to dig into the details... you appear to be guessing at possible rents... call and ask what they are.  How big is each unit.. are they efficiency apartments at 350sf, or more full size at closer to 1000sf?  Who pays utilities, how old are the major systems (roofs, ACs, water heaters ?  Are the tenants on leases where you can’t change their rents?  Are they section 8 where you might have certain restrictions or possibly poor performing tenants?  What do they look like on the inside?  Are there structural concerns (sinkholes or whatever)?  Is the listing just totally lying about something (cross check info with county records - I’ve had people completely misrepresent square footage and amenities to the point we walked on the deal!

Bottom line... $25,000 per unit (or less) seems really cheap if it’s regular size apartments... but if they are boarding rooms (ie. Really small) maybe they are priced right?  ... Take a look at when they sold last and what they paid for them.  Make sure the price is for all the units combined (not some subset).   

I didn’t see property insurance listed on your list of expenses... that’s thousands a year in itself... my guess about $6000/ yr... so maybe $500/month.  

Just a few things to consider.  Hard to know what else to suggest without knowing more about the properties.

Best of luck!

Randy