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PROTECT: Build Your Team - How to Evaluate a Potential CPA For Real Estate Investors
/It’s time to talk taxes!
It’s time to talk taxes. Yes, I know that’s about as fun as a root canal, but it doesn’t need to be stressful when you have the right professionals working hard to help you maintain the highest possible cash flow for your business. The following is my personal list of what to ask a CPA as you "interview" them for the job of serving you, your family, and your real estate.
Save this list for when you go to talk with a CPA. Now is the time to do this - before the rush of Tax Day in April. Print this list and write your answers here as you may informally chat with preferably at least 3 different CPA’s and this will help you discern who is going to be the best fit for your business needs. You may meet them at networking events or offer to take a friend who is a CPA out to lunch. It is worth the time to find a professional whom you know and can have a strong working relationship as you grow your business.
Ask the following:
How many real estate owners/small business owners/business start-ups do they serve? What type of businesses? Do they personally own rental properties?
Have they been familiar with your type of rental property (i.e. do they do single-family homes, commercial with apartments above, duplexes - whatever type of rental you have to ask them if they have ever done the taxes before for this type).
If you have done any type of repairs, has the CPA asked you about the type of repairs? Some are subject to depreciation over the life of the asset whereas others may not be treated the same way. Ask lots of questions and give them lots of information on what types of expenses you’ve incurred.
On your schedule E that you bring into them, ask them questions like, “Am I getting all the tax benefits possible from owning this rental property?”
If you had to provide appliances or other items that are not attached to the structure, did the CPA list those items? What about computers/technology used solely for business? If you have to pay additional insurance, did they ask for that amount?
What is the viewpoint on the home office deduction?
Are they familiar with the guidelines of what constitutes a real estate professional?
What type of small businesses do they serve? LLC's S-Corps C-Corps?
Will they provide references? (they should, and then call their references!)
Do they provide representation in the event of an audit? Ask how many audits in an average year that they represent. Let them tell you stories about recent audits.
What is the fee schedule or general price range for audit representation?
Is there any part of filing returns that they don't do? For example, Ohio has School District tax (in addition to property tax, yikes!) and it's a simple form but some CPAs don't want to bother with it.
Will they review the last 3 years’ taxes to possibly amend?
What is their philosophy on taxes? I.e. some CPAs don’t want to deduct anything whereas others deduct possibly too much. Their personal viewpoint matters. This actually varies widely in the interpretation of the law, especially with recent tax law changes. Be certain their philosophy aligns with yours.
What kind of work do they like to complete “pre-tax” season?
What will they do with the 1099 forms that may need to be completed? How much will that cost? Compare with online options based on your level of tax expertise. Are they willing to complete them or are they willing to let you complete them? The cost difference and pros/cons are sometimes significant.
What are their digital security and identity theft procedures? How seriously do they take internet security and firewalls?
What other services do they provide? Bookkeeping? Tax strategy/coaching?
What are the credentials of the staff? Are they all Enrolled Agents or CPA's or tax prep secretaries?
What is the process that happens when a return is submitted? Who works on it? Who checks the numbers before it's filed? Who is liable for mistakes? Do they carry Errors and Omissions insurance on all their staff? If yes, what company? Listen to how they speak on this topic. Are they open and transparent about this?
What professional organizations are the members of and where do they complete their continuing education? Most of the time this will be readily posted in the office and they are happy to genuinely share all that they have accomplished professionally. You want someone committed to ongoing professional education.
What format do they require when taxes are submitted? Paper or digital? Do they keep digital copies of receipts or is that the client's responsibility?
Can you work with their personality and the friendliness of the staff? What is the office like? Organized? Peaceful? Or is it stuffy and filled chaos? Is the office clean or neglected and well-worn? You can discern a ton about services just from observing the physical environment.
I always recommend viewing this as a job interview of sorts with this CPA firm holding the very life of your family in their hands. I know and have seen the absolute devastating impact of not having the taxes done correctly.
Always double, triple check everything and ask questions until you’re completely comfortable and confident in their answers. Read www.irs.gov for yourself and cross check the answers you receive for perspective as well as accuracy. A good CPA is totally worthy of paying for their services - this is not an area to cut in trying to save money. Look at your CPA as a member of your winning team that will make your real estate profitable and in compliance for the long term. Always make certain you are receiving the quality of service that you need and that you communicate your long term goals clearly.
ACQUIRE: Intro Property Insurance Basics & Strategy
/Property Insurance is a vital, required component of creating PROFIT strategy with your rental property. There are many moving parts that you must understand in order to choose the best policy for your property. Insurance companies are in the business of making a profit as well, so it’s vital that you understand how the insurance game works - and how you can make it work for you!
When you identify a property to purchase, you’ll want to get a quote (See article on that process) but BEFORE you start getting quotes, let’s get a firm foundation about insurance itself!
Insurance companies know their numbers. They know statistically how many claims will occur; they just don’t know which houses will have claims but they know what risk factors will cause a loss. Therefore, they are careful to only insure properties that they don’t think are risky.
Insurance companies take your premium and pay other claims, betting that they will have more premiums than claims. The insurance companies are particularly concerned about the BIG FOUR concerns on a property: Roof, Electrical, Plumbing, & HVAC. These are the most common areas that produce a loss in a property. When you are looking to acquire a property, make note of the condition or current updates on these four areas.
Each state has it’s own type of insurance requirements and the terms vary widely across the country. Find your local department of insurance HERE listed by state.
When on your state website, look for consumer resources or news updates that relate to homeowners’ insurance or landlord/rental policies.
Each property insurance policy typically has two basic parts.
1) Coverage for the building or other structures.
2) Coverage for liability is someone sues for the owner’s negligence of some sort.
Know that BOTH parts are important and have their own EXCLUSIONS. Most insurance companies provide a declarations page, but this is NOT your policy that is legally binding. After you purchase a policy, you’ll receive the full policy which can be 100+ pages long. It’s important to read it and ask questions about the EXCLUSIONS and how the coverage works in real-life claims situations.
Each insurance policy will have a deductible, an amount that you pay per policy in the event of a covered loss, fire, windstorm, etc. Typically the deductible can range from $500 to $10,000 depending on the type of policy. The higher the deductible (the amount you will be financially responsible for), the lower your premium will be.
REMEMBER: you are partnering with your insurance company to protect your property from bad things happening. You choose how to structure your responsibility and which policy reflects your values and financial situation.
ACQUIRE: 8 Steps for Gathering Insurance Quotes for a New Acquisition
/Gathering Insurance Quotes for a new acquisition is a step that you take as you are looking to put an offer on a potential property. Only do this step is your are sending a letter of intent or offer.
Step 1: Look online for an independent insurance agent near you. These are brokers who request multiple insurance companies and they can shop for the best price from among the companies they have an agreement with to represent.
Step 2: Consider called a national exclusive agent, such as Allstate, State Farm, or Nationwide. Typically, big name national insurance companies don’t like landlord policies and will only do one or two properties if you have your home/auto with them but if you are just starting out and already have existing policies with them, they may give you significant multi-policy discounts.
Step 3: Have vital info ready when you call. This includes all your data about the property and potential updates to the roof, electrical, plumbing, and HVAC.
Step 4: When you call, you’ll talk to a admin or secretary for the agent. Know that they are often NOT licensed and not able to answer any questions for you. Let them take your information and ask for a time when they can email the quote. Then, make an appointment for a phone call with the agent. SCHEDULE officially so it’s set in stone on the calendar. Insurance agents are often over worked and you’ll want them to carve out about 15-30 mins so be respectful and make an appointment NOW for a time after you’ve received the quote.
Step 5: Receive the quote and repeat for 2-3 other insurance companies and agent/brokers.
Step 6: Compare the quotes. This is the most VITAL step here. You’ll want to read through and look for parts that mention EXCLUSIONS. Also, look for your deductible. Note whether it is Replacement Cost or Actual Cash Value coverage. You’ll want Replacement Cost whenever possible - note any exclusions on this coverage. Look for the words “co-insurance” or “ACV” for Actual Cash Value. These indicate that the insurance company wants you to take more responsibility for the property in the event of a loss. It’s fine, as long as you know ahead of time.
Step 7: Follow up with each agent at your set phone appointment and ask about any EXCLUSIONS. I know I keep emphasizing that, but each company excludes different items. Take notes on each quote form so that you can remember exactly who said what about which policy.
Step 8: Choose the policy AND the agent that best fits your property’s needs and your business goals.
Protect: Build Your Team Questions to Ask a Potential Real Estate Attorney
/Questions to Ask a Potential Real Estate Attorney
Building the right professional team is vital to any real estate business. Asking the right questions to the right people is the right first step.
DISCLAIMER: This is NOT legal advice. This only my thought process and my personal list that I used to find a real estate attorney who met the needs of our specific way of growing our real estate portfolio.
You can find the initial answers to these questions in multiple places, so do research first BEFORE speaking directly with the attorney.
Search your local bar association website for law firms that practice your specific type of real estate. For example, if you are doing residential real estate, you don’t want to work with a commercial real estate attorney - unless you have mixed-use buildings where there are both residential and commercial units. Real estate is specific to the type of building and laws vary accordingly.
Look at the potential law firm’s website. Search the list of attorneys within that practice. Look at the credentials of each attorney. Answer the following:
Where did each attorney go to law school?
What was there focus in law school?
What additional professional organizations or awards are listed?
What is the language and tone of the website? *This seems silly but it makes a difference!! The attitude of the firm is a vital component of how you will be treated and how your legal issues will be addressed. You can tell from the tone and language if it’s going to be a potential fit or not.
Is this the type of firm that is the right size for you? Do you need a huge firm with many different attorneys to address your issue? Or do you need a more personal touch working with a solo attorney? Somewhere in the middle? You can tell this from the website as often they list the number of attorneys and the age/history/size of the firm.
UPDATE: You will also be wise to consider the political views and member organizations of the law office involved. If your potential law office is involved in tenant rights and promoting government coercive rent control, they may not have the principles to defend your freedom to receive your property back from squatters.
Create your list of specific questions for the potential firm and attorney you’ve identified. Be sure to be as clear as possible on your need!! What do you need from this firm to accomplish? Remember attorneys literally charge per second so be as clear as possible so that you can be as time-efficient as possible. On that note, one of your first questions should be how their billing works!
My list looks like this because we have worked with drug houses/ distressed properties in off-market deals. We also work primarily with private lenders in creative financing, so we need an attorney who is comfortable with these topics. We didn’t find one who fits both our needs, so we have two different law firms we work with.
ASK QUESTIONS:
Do you do evictions in the county where my property is located? ** LAWS VARY IN THEIR PROCESS AND APPLICATION PER COUNTY.
How often do you do evictions?
How many evictions per month?
How many land contracts, private lender mortgages, or sub-to deals have you done recently? *make sure it’s been in recent history as laws change quickly.
How often do you work with closings for private lenders?
What title company do you work with? Are they comfortable with private lenders, land contracts, subject-to’s, and options?
Again, your questions WILL BE DIFFERENT based on your unique needs.
Side Note: Please be kind, professional, and considerate of your potential attorney’s time. The best way to set up a phone call is to work with his administrative assistant and be clear about the nature of your call and IF THEY CHARGE FOR AN INITIAL PHONE CALL. Send your questions via email in advance. Know that attorneys also charge to respond to emails even if it’s to just say “received.” Some do and some do not, but be clear upfront about how their fees work. It’s worth the price of the initial phone call so don’t let that deter you from having a top-notch attorney. Just know the price ahead of time. Also, ask the attorney’s admin some of your questions, as the staff is usually super helpful, and be aware the staff may ALSO CHARGE FOR PHONE CALLS but not usually if you are setting an appointment or learning about the firm.
Also, please don’t ask your friends who are attorneys questions on non-office hours. Don’t be that person!!
Finally, please be confident and professional and expect that same level of professionalism in return. If you ever feel for one second that the attorney is speaking to you in a tone that is not respectful of you as the real estate investor and business owner, you MUST NOT WORK WITH THEM. And mutual respect goes a long way, so treat them with respect as well. You are building a team and looking for professionals that can support your vision and be mutually beneficial to all involved.
ACQUIRE: Private Money Funding vs. Hard Money Funding
/Where to find money other than banks? Let’s talk about your choices!
As interests rates rise and banks get nervous about what the Federal Reserve banking tyrants will do next, it’s best to have multiple options to be able to acquire a property.
Private Money Funding describes just that - a private individual who lends money on real estate. Typically this is NOT a person who is lending as a business. It’s an individual with a HELOC (home equity line of credit), or Self-Directed IRA or 401(k), or simply doesn’t want their money tied up in the stock market any more and is looking for a “real life” asset.
Often, Private Money Funding is basis primarily on a relationship, not the profession of the lender. The Investor is the guide and the Lender is not the experienced one in real estate typically.
Hard Money Funding is completely different! It IS a company or individual who does this professionally as an income stream. There will be forms, processes, and credit pulls whereas Private Money Funding does not have those requirements. Hard Money Funding terms are set by the Lender. Private Money Funding terms are set by the Investor.
This is just a brief definition of terms and we will dive in further to this topic!
ACQUIRE: Conventional Financing - Basic Financial Statement Template for Banks
/As you begin to gather your financial documents to speak with a lender, you may feel overwhelmed by all the moving parts. Instead of overwhelm, try to re-frame it as completing your favorite puzzle.
There’s a strategy here! You must pull all the different pieces of your financial puzzle together to create a complete picture. You’ll need to gather supporting documents so that you financial statement is complete.
If you’re not a “Numbers Person” - don’t despair! Numbers are merely a way to communicate. Think of your numbers as a way to share your heart and vision with those you will be partnering with in funding your business. Numbers build a bridge of trust and credibility that you will be honest and do what you say. Your Financial Statement should be simple, honest, and easy to read. Adjust the spaces between items as needed. Make it easy for your lender to read your document. They read hundreds of pages and you want your documents to make their life easier!
Undestand how most bank works:
Most banks that you want to work with still have a real live person who will process your loan. The larger mortgage companies use Artificial Intelligence complex computer systems and we want you to avoid that if at all possible. Real people are far better for actually getting approved when you are building residential real estate.
The first person you will likely meet is the Loan Officer. They may even be called a Vice President of Lending at small banks. Understand that they are the “Gatherer” of info but NOT typically the “Decision Maker.” This is the person who can teach you about what the bank likes, but know they don’t have the final call in approving a loan (even if they look and sound very important!)
The next person whom you won’t meet but is very important is the Loan Processor or Credit Analyst. This is a detailed-oriented person who stays in the background with your file crunching numbers with gusto to presumably predict if you’re a good “risk” for the bank. You want them to be happy crunching your numbers! The more organized you are….the less cranky they are. You want to get them any additional docs, well organized and labeled clearly for them to finish their fun puzzle of analysis. Yes, they truly like their job.
The last people that your file goes to usually are the actual Decision Maker/Approval Committee. You may or may not know who it is, but you can gently ask. This tends to be a hush-hush step. They don’t like to disclose it to protect their Decision Maker from revenge acts when they have to say no.
Be confident in your numbers, be professional as you ask about the process and who is in charge, and be quick to be anything that they ask for but not too much info that they’re overwhelmed. It’s a delicate balance and it helps if you have a detail-oriented person at the helm of this process. If that’s NOT you, don’t despair. You will need to enlist one person who loves details to help us with the project and connect that person directly to the Loan Officier and to your own Data. Check-in frequently with BOTH the loan officer and your bookkeeping/data person to be sure everything is arriving on time to the right person. You need to stay in charge of the whole process but empower each person to do their part.
Finally one warning about technology. Most banks have a private portal to upload and it’s not a technology that has grown up yet to be easy. Right now, the Loan Officiers we work with have a terrible time losing documents. The Portal “ate” my loan-work! It’s an all too common problem and can cause costly delays. We get around this by taking in paper copies if possible to the physical location OR sending it via secure email but not the Portal. Just know, if something gets lost, always just cheerfully replace it! Never get frustrated or accusatory as that will most definitely not help you case for getting approved.
ACQUIRE: Creative Financing - Master Lease / Sublease
/Master lease /Sublease
When finding deals off-market, the more creative options available, the more likely a win-win agreement can be crafted.
Here is an example of a Master Lease:
The definition of a Master Lease/ agreement is between the Property Owner and the Real Estate Investor who takes the position of Tenant. Then, the Real Estate Investor subleases the property to another qualified tenant with the full knowledge and permission of the Property Owner.
We got a call from a current resident that her friend was “upside down” in her home. It
This is for informational purposes only and DOES NOT constitute legal advice. It’s always good to have a real estate attorney review any such agreements as different laws may apply in different localities.
Acquire: Real Estate Profit Calculator
/This may be the most powerful tool we’ve ever developed and yet also the most simple. We base all of our book keeping and acquisitions, long-term forecasting and bank accounts off this simple Excel sheet. You also have access through Google Sheets that has been shared to you. Feel free to change the percentages based on your target market, class of neighborhood, and property management/vacancy rates.
Train: Eviction - How to Handle Neighboring Residents During an Eviction
/Eviction is never a desired outcome for a Property Owner or for a Resident. Handling it can be stressful and costly. See other Sections on How to Avoid an Eviction. This section is on how to deal with residents in the same building or neighborhood as the unit experiencing an eviction. At the core, an eviction is a break down in personal responsiblity of the resident. Also, the communication with the owner or property manager has also become strained or nonexistent with the resident. That broken communication often spreads and causes problems with neighbors and even law enforcement. Here are few tips to deal with an eviction already in process.
1) Don’t tell neighbors too much. Only tell as little as possible. Resident who are being evicted can accuse you of slander and that gets ugly. Be professional and vague if directly asked by other residents.
2) Do make sure that you always comply with Fair House Laws as other residents may “tattle” if you in any way violate Fair Housing. Sadly, many are trained to try and entrap property managers or owners into a violation.
3) Communicate clearly and in writing. Avoid getting stopped in person or talking directly to a resident. If a resident calls, feel free to text in response so that you have date and time-stamped response.
Here is an example:
Good Morning, I wanted to let you know that next door there was an eviction yesterday. In an effort to continue to improve the neighborhood and working with law enforcement, this sadly was necessary. Please know that we are committed to making sure the neighborhood is safe and clean. The debris will be removed by the Sanitation Department tomorrow. Please avoid the area completely for your health and safety until the municipal officials can clear it out. Thanks!
Acquire: Conventional Financing 6 Steps to Find a Bank & Questions to Ask
/As you begin your search for the correct team to help you build your portfolio, you will need to decide on how to fund your acquisitions. There are pros/cons to each type of funding, but this article is focused on if you have decided to look into bank funding.
Disclaimer: Each person’s financial situation and business is different. You must make that decision yourself with the help of trusted advisors. Know that if you ask a banker, you will get a banker’s answer. So, please look into Private Money, Cash Purchases, and Creative Financing as well BEFORE deciding that bank funding is the way you want to go.
Once you are ready to look for a bank, follow these 6 steps:
Step 1: First look on https://research2.fdic.gov/bankfind/ FDIC website to find a bank that is local to your area of investment and small to mid-sized in assets. Look under the “Financials” tab and you’ll be able to see in the millions how much the bank has. Look for between $200-$600 million in assets. Typically those banks keep their underwriting in house and avoid the complex Artificial Underwriting logarithms that give immediate denials of applications.
Step 2: Timing. When calling the bank, be sure to avoid calling during lunch hours or Monday morning or Friday afternoon. You’ll most likely get voicemail. Call during “non-peak” hours. I prefer to call on Tuesday/Wednesday afternoons for the best chances of talking to a live person.
Step 3: When you call the bank, you’ll want to ask to speak with the “Loan Department that works with real estate investors” so that you don’t end up in the department that works with first-time homebuyers. You still may be talking with the secretary or admin assistant for that department, so always ask “Am I in the right place?” “Can you give me information about your loan ‘products’ for real estate investors?” “Should I set up a time to speak directly with a loan officer?”
Step 4: Once you have the correct bank and the correct person to talk to, here is a list of potential questions that you should ask during that phone conversation:
Say something like… “I own investment properties and I am looking to grow gradually. What terms do you offer for acquiring investment properties?” Know that they will have different qualifications for either acquiring or refinancing. Start with the acquisition process first.
Ask, “Do you work with many investors?” Wait for their answer as they will give you insight into the bank’s strategy and niche.
When asking about refinancing say, “I have some properties that have quite a bit of equity and I’m thinking about refinancing a couple of them. What are your terms for a cash-out refinance?”
“Do you have a seasoning period? So if I rehab it and increase the value over 2-3 months will you refinance on it’s new appraised value or based on the original purchase price? What kind of properties do you like to refinance?” (single family, multi-family, commercial etc).
If the answers lead towards a good fit for your business, then ask to set up an appointment with the appropriate person. Say, “I’d like to come and talk through more details in person to see if this will be a good fit for my portfolio. Who would the best person be to speak with for that appointment?”
Step 5: At the in-person meeting, here are some items to say and ask:
Say, “I’m looking for a bank that I can grow with. Do you consider yourselves real estate investor-friendly? Do you loan on properties inside an LLC? How long does the LLC need to have been in existence? Will you lend if I have more than one LLC?”
Also, ask, “Tell me about the loan approval process?” Take notes of who is the gatekeeper and who is the actual decision-maker.
“How do you run numbers on a potential property and on an investor’s portfolio?” Not all banks are the same.
“What are your loan origination fees?”
“Are there any other fees that I should know about with the closing?”
“How much do typical appraisals cost? How is the appraiser chosen?”
“What is the typical length of time that the process takes?”
“How do we lock in the interest rate? At what point should we do that? Do I have to decide the time or does the bank decide when to lock in the interest rate? How often do you update the interest rates?
“What is the application fee and what does that pay for?” This is different than the loan origination fee.
“At what point in the process do you pull credit? Will I be notified BEFORE this is pulled? Can I have a copy of the report (they are required to give you one)? Which credit reporting agencies do you pull from? (Experian, Trans Union, and Equifax)”
“Do you sell your loans on the secondary mortgage market? If so, when in the process do you sell it? Also, do you retain serving rights? If not, then whom would I be working with for the length of the loan?”
“Do you require escrow? (AVOID ESCROW!!!) If yes, how can we work around that requirement because I do not escrow as I want to be fully in charge of making those strategic cashflow allocations? I plan on appealing property taxes and shopping for insurance to keep my costs low.”
“Do you give a discount for autopay? Can I pay my loan online? Are there any discounts for paying online? Are there any pre-payment penalties?”
“Do you have a seasoning period?” *Note: ask this and other questions more than once if you are talking to different people. You may get a slightly different answer and also receive more information on the topic.
Step 6: Finally decide on a bank and submit your Credibility Kit, Financial Statements, Profit & Loss Report (Also called Income/ Expense Report), and Rent Rolls.
Always call to follow up that all documents have been received. Read ALL the fine print, more than once if needed!! Build relationships with those in the loan department who are serving you, but also know that they are employees and may be transferred or eliminated at any moment. Ask even more questions than these. This is NOT an exhaustive list. This is only the start of having those important conversations with your bank or loan officer. Each person’s situation is unique, and you may need to ask completely different questions depending on your portfolio and goals.
***You may find it helpful to bring this list with you and print it out to write the answers in the blank spaces provided.
Automate: Tenant Training Special Circumstances How to Handle a Drug House in a Neighboring Property
/Now, hopefully you never have a neighboring how that looks this bad! However, you may in certain neighborhoods run into an adjacent property that has illegal drug activity. This provides serious problems for your property value and hinders the ability to place quality residents in your own property. What’s to be done?
We believe that it takes a comprehensive approach to handle such deep and complex problems. What usually happens is that the entire area knows what is happening, law enforcement may even be involved, but it sadly continues a long time until there is enough evidence to convict. The negative impact of this type of illegal activity reaches far beyond cashflow to even life and death.
We found the following steps helpful, but it is not a linear progression. It is often all at once and repeated.
1) Introduce yourself to the neighbors excluding the drug house. Give out your business card. Let them know you are serious about improving the neighborhood. Be accessible and serious while acknowledging the challenges in the area. Listen carefully to their stories and concerns. We can’t understate the value in this step - listening is vital!
2) Document everything. Keep a file noting exact times, dates, and details of any illegal activity observed. Look for patterns. Write down license plate #’s and make/model of vehicles. Write down any distinctive features such as tattoos. Communicate with law enforcement and ask what information they need. If you are not onsite often, train your repair crew to make notes, take photos, and videos. Ask residents and neighbors to do the same. Be sure all the neighbors have your phone number to send them to you. While you’re talking to them, you can have the neighbor text you their number and be sure to save their name and address in your phone.
3) Place high intensity solar powered motion lights facing the offending parcel. Light it up around all exterior entrances for your current residents.
4) Consider privacy fences and security cameras. At the minimum you can place fake cameras and signs.
5) Know that you can call the local law enforcement for a “Well Visit” for any number of reasons on the address in question. Check with your local ordinances as to the reasons allowed.
6) Call your local code enforcement department for any trash, health, safety, or fire hazards occurring at the residence.
7) Locate through the County Auditor the name and phone # of the current owner. Write a letter or call the owner - not to complain- but to offer a listening ear, a cooperative ally, and to perhaps offer to purchase the building. “Have you ever considered selling the building? I own the address next door and I admire XYZ about the building.” Be honest and find one positive thing even if it’s only the location. Again, this is the time to listen. Ask good-hearted questions. Don’t promise anything, of course, but offer to put together some numbers if the opportunity seems appropriate. Be direct and friendly. See the section in the Portal on Crafting an Irresistible Offer.
8) Let your current residents know that you are aware and you are actively involved. Don’t discuss particulars, and in fact let them know that you can’t discuss it because you’re working with law enforcement. The reason for this is two-fold. You don’t want to spread rumors or waste the time talking about the drama AND you don’t know if your current residents are involved or not. Always error on the side of NOT disclosing any details. It’s enough to reassure them that you’re actively involved in solutions to the situation. Don’t apologize. Just be confident and firm that it will get solved.
Be persistent and patient and relentless. It will take time, possibly money, and patience to coordinate the removal of the drug problem either through law enforcement and encouraging the current owner or through purchasing the property yourself. Either way, it is a win to stop illegal and harmful activity from happening near your rental property. You obviously want those who do illegal drugs to turn their lives around and make better choices, but they must feel the consequences of their choices in order to have the motivation to change. You are interested in providing safe, healthy homes that build a community. In return, this will create a profit for you by way of safe, well-rented homes!
Automate: Tenant Training -How to Onboard Existing Tenants in your Current Portfolio
/This is almost the hardest group of tenants to reach in terms of onboarding them into your new system (the hardest being the inherited residents at a newly acquired property.
In order to work together with residents who already know you as the property owner is a special challenge all it’s own. Current residents are already familiar with you and trust you, which is good, but as is common, familiarity can also bring disrespect.
The first step is to map out what kind of relationship that you DO want to have with your residents. You’re not their friend, but you can still have a friendly professional relationship where they respect you.
We recommend being clear and committed to creating a business brand so that there is a degree of separation, both for your benefit and for the benefit of your residents. When they see that you are improving your systems and working within a larger system, they will know that you are continually committed to improving their quality of home.
The first step is to outline your company vision. What is the goal of your business, even if you’re a sole proprietor at the moment (we do recommend consulting your real estate attorney and real estate CPA to form a business entity that is right for you, typically that’s an LLC, LLP, or S Corp).
Next, choose your business name. This is should be short and easy to spell. Check also the availability of website addresses and check with your Secretary of State for researving the name.
Third, choose letterhead that you will use with your business name - be sure it’s compliant with using the correct, full name including LLC designation.
Finally, write a “Welcome” letter to your current residents letting them know that you are now working on improving the customer service side and have decided to work with a larger company in order to provide on-going improvements to their experience in renting. The “larger company” doesn’t need to be named because you will actually be working with several larger companies to help set up your systems *See Apartments.com/Trello/Google Voice info at other sections of the Portal. Be sure to provide them with your new office # and only ever respond them using your new Google Voice phone #. Don’t answer your personal phone if a resident calls! Text them back on your office phone and remind them that you are currently only allowed to use the office line with the new company name. That shows two things. 1) you have guidelines that you must obey now. 2) you’re serious about the changes and there are NOT any exceptions for long-time residents.
In the “Welcome” letter, be sure to let them know what role you will now play in serving them - because that’s truly what they are most concerned about. And also, this is NOT the time to raise their rent. Make only ONE change at a time.
By onboarding your current residents to the new system, you will continue to train them that you are working with a larger company with an Approval Committee, Partners, or other sections of your company to whom you must answer. The Approval Committee may be you and your spouse, but your residents don’t need to know that and you’re under no obligation to disclose the identity of those involved in your new business entity. And truly, residents only want to know that you’ll take good care of them and their home per the terms of their lease, which of course will need to be updated when your legal entity is formed. We highly recommend having your attorney draft or review your entire lease and addendum prior to that transition.
Train: Principles to Help Raise the Rent & Keep Happy, Long-term Residents Sample Letter Included
/Frustrated with trying to draft a Rent Increase Letter? Yes, this is one of the more challenging letters to write. No one likes to raise the rent or have it raised. Either way, it’s uncomfortable. We get it. Let’s make this as easy as possible with 5 principles.
Principle 1. In our economy, prices are always going to increase. As long as the government continues to create money out of thin air and produce a hidden tax called inflation where they steal the value of the dollar, price will go up. Accepting the broken system we have doesn’t make the reality of rent increases any better, but it does help give context to it.
Principle 2. When you provide an excellent service, you will find people who are still happy to pay you rent even if it increases. As you craft your business, you’ll have confidence in the housing you provide. You’ll find ways to increasingly provide value to your residents and to stay competitive. Don’t be afraid to charge more and protect your profits when you have built a business on constant improvement as well.
Principle 3. Train your Residents that rent will go up each year. Write it into your lease. Repeat it in different ways, always staying positive, that “we are all in this together.” It’s never an us-against-them mentality. It’s always “let’s do this together.”
Principle 4. Give them plenty of time - at least 30 days - and give them as much choice in the matter as possible. If it’s a lease renewal, give them an option for lower increase with longer lease duration. Or, they can choose a monthly lease with higher rent increase. That autonomy helps take the edge of a rent increase when they feel they at least have some say in how much the rent goes up.
Principle 5. Never apologize for a rent increase. But don’t be snarky about it either. It can be tempting to go to either extreme. Stay professional. Don’t respond emotionally if a resident responds with anger - usually via text. Always remain understanding and calm and firm.
Here is an example of a Rent Increase Letter: