The Importance of Being Earnest in Giving out Surveys

Every year I hand out surveys to all my tenants, and here’s what I have learned in the process:

1.       Most people will not fill out the survey. 

Even though we have made the survey as easy as possible—fill in the bubbles from 1 to 5, from poor to excellent on several categories, most people will not take the time to fill it out and return.  We have considered randomly drawing a gift card to increase participation, but haven’t done so yet.  We want tenants to have the opportunity to fill out and return anonymously, for obvious reasons, so we haven’t worked out the reward option yet.  We are averaging about 20% participation, but out of 400 units, that is still about 60 surveys to peruse.  But we don’t stress too much about poor participation, because even just one survey can provide meaningful feedback and we still get the chance to market ourselves (as I discuss below).

2.       The comments we get are productive.

Every year my office managers cringe at the thought of what might come back written in the comments. I’m sure they are thinking in their head of the problem tenant who keeps harassing them in the office about a maintenance issue that is nonexistent or the tenant who is angry because she is being evicted.  Sure, every once in a while we get a crazy comment, but they truly are outliers and we usually know who is behind it!  For the most part, we get good feedback on our strong points and not-so-strong points.  For example, in my last survey I found out my tenants really like my staff, but they thought our lawncare was just mediocre.  So this past summer, we put together a better lawncare schedule and put one person in charge of making sure the lawns were well maintained, instead of relying on tenants willing to mow for reduced rent.  It will be interesting this year to see if the results improve.  Also last year, one tenant mentioned in the comments that our dumpster area could use a power washing.  Yes it could! And thanks for reminding us!  Productive comments help us become better.

3.       The survey is one of my best marketing tools. 

Even if people do not fill out the surveys, they usually read over them.  In my cover sheet, I have the opportunity to remind everyone what Mitcham Group Apartments has done to improve the property over the past year.  So usually I list our improvements: erected new pool fence, blacktopped the parking lot, upgraded furnaces, etc.  Sometimes I mention the items on our to-do list—this lets people know that I have noticed the peeling paint and sagging porch that needs attention.  It is also the perfect time to remind tenants to LIKE us on FaceBook or FOLLOW us on Twitter—two avenues where we can market ourselves year round.  We even put in a notation that if you are looking for a new place, to check out our website or call us with your needs.  After all, if our tenants need a bigger apartment or want a change of scenery, we want them to look at our other offerings first!  The surveys can also be informational.  For example, one year when we gave out surveys in a particularly bad winter, we reminded people of important weather tips as a way to decrease our frozen pipe issues!

4.       Careful planning of my survey paid off.

David Letterman pointed out the foibles of surveys one night in a monologue. He said, “USA Today has come out with a new survey – apparently three out of every four people make up 75% of the population.”  True, if you go into the survey just looking for the obvious, you will miss out on hearing the things you need to hear.  In planning my survey, I got help from college students taking a business course in statistical analysis.  Luckily they liked my idea and it got used as a classroom project! I benefited from having experts (the students and their professor) develop the survey and provide feedback.  There are a lot of websites on the internet that can assist in this process too, but I highly recommend that you have outside people review your survey for bias and make sure you are not just getting back what you wish for but something that will energize and improve your business. 

I hope these four things I learned through surveys are helpful to you and your business. In the meantime, if you have a suggestion or question, feel free to Ask the Landlady!

Should Landlords & Landladies be LLCs?

Eleven years ago I became an Accidental Landlady.  My husband and I bought some properties in a short sale because it was next to his professional office, and we thought he might someday need more parking.  The hitch: it came with five tenants who were happily ensconced in the properties.  I was teaching classes and raising a family but thought why not add one more thing to the mix. Thus, the path to being a landlady was established.

The first thing I did was read up on what I was getting into. Since my husband had a potentially liable profession, I wanted to keep my endeavor as separate as possible from him.  The universal recommendation seemed to be to form an LLC.  I had a local attorney do this for me for about $600.  Since that date, I have formed several other LLCs, utilizing LegalZoom or other online places, for under $300.  

The main purpose for an LLC is legal protection-- your personal assets are separate from the business holdings.  One recommendation I heard from other landlords, was to create a new LLC for every property--- thereby further protecting assets if you are sued.  For example, if you have ten properties under one LLC-- if you are sued, the pot of money includes ten properties.  If you just have one property-- there is only one property to be legally attacked.  

Legal protection is the biggest reason for an LLC, but I have discovered other good reasons for formulating one:

1. Protecting debts.  With an LLC, you can put utilities and other services in your LLC name, thereby protecting your own name and assets from that debt.  I often put utility bills in my LLC name and constantly check to make sure that tenants don't turn off utilities that get put into my name.  If I incur a large debt for some reason, the utility cannot come after me personally, only my LLC. This has not happened, but I like the idea of further protection!

2. Making you appear to be more important.  Even though it costs under $300 to form, an LLC, for some reason, inspires awe.  It just sounds better!  When I started my business, I called it "Mitcham Group LLC"-- it sounded better than Wendy Myers' Rentals.  For one thing, I was a "group"-- no one had to know that it was just me cleaning, painting and renting the apartments at that time!!  Now I have several employees and ancillary services-- so I have grown into a group, but at the time, it was just being hopeful for the future!  And LLC just added that professional touch that made people feel like I knew what I was doing.  

3. LLCs are more laid back.  Since I have gotten bigger, I've looked at S and C corporations.  Of course, your accountant is the best one to advise you in this area, but for me, the LLC works and is easier to manage.  I am free to set up the company structure and bylaws however I want.  I don't have to answer to a board of directors or jump through any other organizational hoops.  

If you decide to create an LLC, my recommendation is to hire an attorney to help out the first time.  It is worth it to have things done right.  But if you have some know-how and want a cheaper option, the online services are great, just be careful of the upgrades they want to sell you on.  For example, LegalZoom wants to charge you $49 to create a federal EIN number for tax purposes.  You can do this yourself in exactly 30 seconds by going to the IRS.gov site, for FREE.  You will need this FEIN to put bills in your name, establish credit, hire employees, etc.

One last tidbit-- when choosing your LLC name, do some research.  Make sure there are no competitors with the same name.  Make sure the name is available from the Secretary of State; in Ohio, you can do a simple online search to check.  Make sure you can get a website domain with your same name.  I heard of one smart individual who wanted to capitalize on a local car dealership name--- he picked a key word from their name.  When he did advertising, he piggybacked on their good, established name to promote his own business.  For example,  his commercials came on after theirs, and his name was next in the phone book.  Of course, even with an LLC, you can choose a "doing business as" dba name.  I have done this--- chosen LLCs that have private meaning, then running them all as dba "Mitcham Group Apartments."  This way I gain some anonymity with my LLCs, but have them all run as one entity for promotional purposes.

I hope this helps any budding landladies or lords out there.  Feel free to email me with any questions or comments!

Choosy Landladies LOVE Their Tenants

Finding the best tenant for your rental is, like anything else that involves humans, part science and part art. 

The scientific part is easy. Have tenants fill out a simple application and attach a copy of a driver’s license or state ID and proof of income (paystubs, etc.).  Using this data you can confirm a few important details:

1. Tenant is who he or she reports to be.  You don’t want to unwittingly rent to someone posing as a law-abiding citizen BUT is, in fact, a hardened criminal.
2. Utilizing free websites in your state/county/city, you can confirm that she or he is not a criminal or sex offender.  You can also confirm whether or not the tenant has been evicted in the past through public court records.  My small town has a municipal court website that provides public access.  My county sheriff’s office provides sex offender information.  I bookmark the websites and application confirmation is a simple process.  I also ask questions on my application where the tenant is asked point-blank about sex offender, criminal and eviction status.  If the boxes are marked yes—you might even be able to save yourself the web search time!  Also, if the tenant lies on the form and you have to evict him/her later, the documentation is helpful for your case.
3. If desired, you can do a credit check.  I do not do this.  In my opinion, tenants often have poor credit (this is often why they aren’t buying a home themselves but, in fact, renting from you).  And I see no correlation between poor credit and tenant success.  My best tenants often have deplorable credit—as long as tenants know that rent must be paid on time, every month—things work well. 
4. By confirming income, you ensure that tenants have at least a 3:1 ratio—three times the rent as full income.  For example, if your rent is $500 per month, tenant income should be at least $1500. 

Now the tricky part—the art of reading a person.  Sometimes a tenant looks awesome on paper.  I had a pharmacist rent a duplex once who appeared to be the dream tenant—gainfully employed, no evictions and no criminal.  However, that tenant trashed the duplex, painted all the hardwood floors and was mentally unstable.  If I had read the warning signs upfront, I would have saved myself from the aftermath.  So the main thing is to look for red flags.

1. Look for personality quirks.  If a tenant calls over and over and proves to be annoying upfront, be assured that the same person will call you over and over once moved in.  In fact, the tenant will expect even more response from you because he/she is paying monthly rent.  Listen to the voice inside of you that says “this person is crazy.”  If you deal well with crazies, by all means, take him/her on.  But in my experience, crazy persons utilize 90% of your time/energy/resources.
2. Look for cleanliness.  You have the tenant’s current address on your application, so drive by.  I have saved myself several times with this tip.  If their current location is trashed, that’s a serious red flag.  Also, check out their vehicles and the clothing worn at the apartment showing.  If the prospective tenant didn’t bathe and his/her truck is trashed, just imagine how he/she will treat your property. 
3. Look tenants up on social media.  You can learn a lot from a simple Google search.  You might find newspaper articles from other towns that show a pattern of bad behavior.  You might see pictures that show drug use or a tenant with 8 dogs that were not listed on the application.  Conversely, you might see tenants that appear to be happy, well-adjusted and living in lovely interiors. 

Your properties are only as good as the tenants living there.  By utilizing an application and listening to yourself, you can find the best tenant for your property.  In my business, we love our tenants because they pay our bills and take care of our properties.   Choosing wisely will help you have the same mutual relationship.

The Rewards of Landladying

In my last post, I addressed the issues related to renting your home vs. selling the home.  While it may have seemed doom and gloom, there are valid reasons to rent as well-- In fact, it might embark you on a whole new career! Or at least another investment opportunity.

Reasons to rent:

1. When you owe more on your home than you think you can sell it for-- renting will buy you time.  It will keep you from taking a loss upfront. Instead, if you can rent for more than your mortgage payment-- enough to cover taxes, insurance, mortgage and an extra $50-$100 monthly for maintenance, then you are in business! Just make sure you do the math-- Rent must cover the essentials to make it worthwhile!
2. You are a handywoman or handyman-- this is a great outlet for your DIY-side!  If you enjoy working on projects, a rental provides you with that outlet as well as improving your investment.  Your skills will pay off with a well-cared for home that will make you money. (especially if you save on all maintenance costs!)
3. You love people.  You have the gift of gab-- you like meeting new people and figuring out if they will be good renters.  Not everyone can do this, so just like being handy-- you have a skill that can be channeled into making money for yourself.
4. You are looking for a new investment opportunity.  As we all know, bank interest is basically non-existent.  You might have money invested in 401ks, stocks and money markets.  But real estate is a nice addition to your portfolio.  Having a home that you consistently rent out will help establish credit for further bank loans.  If you live in another home that you own, you will essentially build equity at double the rate (two homes!)  Remember when Mom took you shopping and paid for your new shoes?  It is always a good thing when you buy something using someone else's money.  
5. Lastly, a real estate endeavor is a nice tax break.  Tax relief is getting hard to find-- so take it when you can!!  You will be deducting mortgage interest, insurance, property taxes and all maintenance.  If you set up an LLC (easy to do and worth the cost!), you will divert some personal liability and give yourself a reason to have a home office (deductible!) for which you may need to buy supplies and furnishings (deductible!).  There is also a cool thing called "depreciation" which will work in your favor for taxes.  It is a good idea to run the numbers by your accountant who can tell you specifically, based on your tax bracket/earnings, how this will impact your tax return.  

 
So there you have it-- five great reasons to get involved in real estate on a small scale.  If it works well and you like it-- opportunities will come your way.  Believe me-- that is how I started.  Just a handful of rentals grew quickly because the more I did it, the more people started to tell me of new opportunities, and the easier it became.

Should I Rent My House?

As a landlady with 400 units (mostly residential, smattering of commercial), I get asked a lot of questions.  For example, "Are you crazy?"  and "How do  you put up with tenants?" are popular queries.  But lately people seem to want my expertise (maybe something to do with the fact that I have been in business 11 years and seem to finally know what I am doing).  So after the musings over my nuttiness for being in the business, the question that comes up is: "I'm thinking of renting out my house, how do I go about doing it?"

This is a big question for sure.  People rent out their homes for a myriad of reasons-- but usually because it is not able to sell.  In our region of the US, there is a little oil and gas boom going on-- so people are also hoping to cash in with a short term rental with some people coming into the area.  Renting can be a great option, especially now when more people are looking to rent than buy, but there are some things you should keep in mind:

1. How attached are you to this home?  
Did you put in custom made drapes that you would hate to see taken down and thrown away?  Do you have wood baseboards that you lovingly scraped with dental tools to expose the beautiful grain of wood that you would hate to see painted over?  Do you have a custom planted garden that you will cry over when tenants let it all go to seed?  Remember, everyone lives differently.  It will be difficult to find the one person who appreciates your home as much as you.  There are some things you can do to minimize cleanliness/yard problems (require housekeeping and lawncare and make part of the monthly rent, for example).  However, you have to be able to allow others to live in your property differently than you do.  Your tenant might not eat dinner in the dining room every night and prefer to eat on the couch in front of the television.  Your tenant might think it is perfectly fine to work on a motorcycle right in front of the house.  You have to be OK with people living differently at times, or this business is not for you.

2. Have you considered all the costs?
Make sure you check your city's ordinances-- do you have to pay an inspection fee or register your rental?  Make a realistic budget for maintenance-- after all things went wrong in the house when you lived there too.  Know the age of your hot water tank, furnace, AC and roof-- these are all big ticket items that you should budget for.  If you spend every cent you get and never have savings, you might want to re-think this landlording thing.

3. How good are your boy or girl scout skills? Are you prepared for emergencies?
First of all, everyone has a different idea of what constitutes an emergency.  I try hard to train my tenants so they know that the only emergencies are no heat in the winter and water pouring through a ceiling.  But, believe me, you will get calls at inopportune moments-- such as when the toilet is stopped up or the AC breaks.  You will have to figure out how you want to handle these things.  I maintain that toilet problems are tenant-created, so they are tenant-responsibility.  I'm sure my tenant wouldn't want to come to my house after one of my children spent the evening regretting their Taco Bell dinner-- I should not have to do the same.  As for AC--- we are not in a super-hot climate, so usually it can wait until 8 am.  If you hate being inconvenienced with calls/problems, this business might not be for you,

4. How thick is your skin?
Being a landlady is tough work-- people will use the B word repeatedly to their friends-- especially when the rent is due and they think their rent is too high (every month!).  And they will take it out on you when the neighbors are annoying, the AC is broken and technician is waiting on a part, or they are locked out and don't understand why you won't get out of bed at 3 am to let them in (that's why God created locksmiths).  You can't let it get to you.  If it does, again, this business is not for you.

If these four things do not deter you, congratulations, you might be landlady material!!! My next blog I will address the rewards of landladying.  In the meantime, if you have a questions, just Ask the Landlady at askthelandlady@gmail.com