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The act of buying a real estate investment is just the first step. The real money comes into play from managing the investment. Effective management requires administrative systems and maintenance systems so that the day-to-day requirements are met in a timely manner and the longer term commitments/projects are scheduled, in advance. And review your monthly financial statements to stay on top of your income and expenses.
There are some very simple and effective techniques you can implement immediately to train your tenants to respond pro-actively. Ensure your prospective tenant has a checking account and that they will be required to provide post-dated checks for the year's lease. If they don't have a checking account, they are not qualified tenants. It's as simple as that. You'd be shocked at how many owners/landlords still accept cash on the first of every month, running after tenants and late rent payments. This is very inefficient.
When a tenant does not pay rent on the first day of the month, you must enforce action immediately. Did they not sign the lease with a promise to pay on the first of every month? And there were consequences if they did not. Many owners/landlords let this policy go lax. They are inadvertently training the tenant that it's okay to pay late. After a while, it turns into an expectation. The tenant actually begins to feel that you are expecting them to pay late so why change their behavior.
Our policy is to issue an eviction notice on Day 2 of non-payment of rent. They are late and their tardiness needs to be enforced. The tenant needs to know that you are serious about getting paid on the first and that you will implement the consequences. When you are immediate with your response, the tenant becomes very responsive as well.
In certain rent controlled areas, we implement a rental incentive policy. You raise the rent an additional $15 to $25 and give them a $15 to $25 on-time rental discount if they choose to pay rent on the first of every month. This is specified in the lease agreement. For instance, if a tenant is supposed to pay $750 per month on the first and they miss paying rent, the rent amount reverts to the full amount of $765 to $775. The reason for this particular lease policy is that certain jurisdictions do not allow late fees.
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July Ono
President of
On the Beach Education
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If their rent check goes NSF (not sufficient funds), the rent amount payable then becomes the full amount plus an NSF fee. If they do this for two months in a row, they are served an eviction notice the third time it happens. We are not being harsh. The fact is the tenant obviously cannot afford to live there so it is better for the tenant to move into more affordable accommodations.
There are managers/caretakers/superintendents who feel bad or guilty when enforcing an eviction notice. This has nothing to do with feeling bad or feeling guilty. This is a corporate policy mandated by you, the owner. You are enforcing the terms of the lease agreement. The tenant broke a promise to pay. The manager is merely reminding the tenant of your expectations and the actions that you promised that would be taken. When a tenant choose to test your boundaries, let them know that paying late is not an option. When they figure this part out, the tenant will find another source of discretionary expense to cut back.
This is an emotional stumbling block for some people including tenants, investors and managers. The property manager gets sucked into a heart-wrenching story by the tenant but in the end, it's a story and they haven't paid their rent. Which means you haven't paid your mortgage. Which means the bank hasn't received their money. Which means the bank will take remedial action against you for a breach of promise. Which means you will then begin collection proceedings against the tenant. And it takes you back to square one. Get the rent on time.
Unfortunately, there are far more incompetent property managers than competent ones. They are taught about property management, not how to run a business. There is a difference. Your property manager is a business partner. Your expectations for them must be clearly communicated. In the final analysis, your investment results will be reflected in your financial statements. Your responsibility is to pro-actively manage your investment expectations now instead of after the fact because by then, it may be too late.
July Ono
On Beach Education
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July Ono
President of
On the Beach Education
|
If their rent check goes NSF (not sufficient funds), the rent amount payable then becomes the full amount plus an NSF fee. If they do this for two months in a row, they are served an eviction notice the third time it happens. We are not being harsh. The fact is the tenant obviously cannot afford to live there so it is better for the tenant to move into more affordable accommodations.
There are managers/caretakers/superintendents who feel bad or guilty when enforcing an eviction notice. This has nothing to do with feeling bad or feeling guilty. This is a corporate policy mandated by you, the owner. You are enforcing the terms of the lease agreement. The tenant broke a promise to pay. The manager is merely reminding the tenant of your expectations and the actions that you promised that would be taken. When a tenant choose to test your boundaries, let them know that paying late is not an option. When they figure this part out, the tenant will find another source of discretionary expense to cut back.
This is an emotional stumbling block for some people including tenants, investors and managers. The property manager gets sucked into a heart-wrenching story by the tenant but in the end, it's a story and they haven't paid their rent. Which means you haven't paid your mortgage. Which means the bank hasn't received their money. Which means the bank will take remedial action against you for a breach of promise. Which means you will then begin collection proceedings against the tenant. And it takes you back to square one. Get the rent on time.
Unfortunately, there are far more incompetent property managers than competent ones. They are taught about property management, not how to run a business. There is a difference. Your property manager is a business partner. Your expectations for them must be clearly communicated. In the final analysis, your investment results will be reflected in your financial statements. Your responsibility is to pro-actively manage your investment expectations now instead of after the fact because by then, it may be too late.
July Ono
On Beach Education
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