the spark rental guide to higher roi - snap landlord€¦ · maybe constant turnover is ruining...

The Spark Rental Guide to Higher ROI

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Contents

Introduction: Offense & Defense in the Tenancy Cycle .............................................................................. 3

Chapter 1: Advertising Vacancies ............................................................................................................ 5

Chapter 2: Screening Applicants ............................................................................................................. 8

Chapter 3: Legal Protection: The Lease Package ..................................................................................... 11

Chapter 4: Automating Rent Collection .................................................................................................. 14

Chapter 5: Retention: Keeping Renters Happy ....................................................................................... 16

Chapter 6: Raising the Rent… Without Losing Tenants ............................................................................ 20

Chapter 7: Move-Out & Preparing for the Next Tenant ............................................................................ 24

Outroduction ...................................................................................................................................... 26


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Introduction: Offense & Defense in the Tenancy

Cycle

eady for the good news? There actually is a silver bullet for maximizing return on

investment (ROI) for rental properties. And it is (drum roll please)… minimizing

vacancies.

The inevitable bad news is that minimizing vacancies means adopting best practices at every

stage in the tenancy cycle. So the chicken-and-egg ponderers among you might ask “Is it really

a silver bullet, if it means doing everything I’m supposed to be doing as a landlord anyway?” I

don’t know, go ask a philosopher. I’m just a real estate investor.

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My name is Denise, I’m a landlord, I’ve managed teams of real estate attorneys for nearly ten

years, and I work full-time at Spark Rental along with a team of other real estate pros. Brian is a

real estate investor with fifteen rental properties, Jennifer is real estate attorney, Ben is a

property manager, Sofia is a renter and personal finance expert. All of us have been in real

estate, finance and property management for a long time.

None of us want to read – or write, for that matter – a boring, stiff or longwinded e-book, so we

kept it short and punchy. All killer no filler, as a puerile ‘00s punk band once titled their album.

Except in this case it’s actually true.

The strategies we’ll explain in this e-book are simple and straightforward, and they really do

work in helping you pull more money out of your rental investments. But they also involve

discipline and occasionally some honest-to-goodness work (the Free Lunch e-book is available

down the street at our competitor’s website).

We’re going to walk through each phase of the tenancy cycle, always with an eye on how to

maximize returns and minimize expenses and vacancies. Above all, we’ll help you avoid the

most expensive threats you face as a landlord: lawsuits, evictions, property damage and rent

defaults.

The focus is on both offense and defense: ways to simultaneously earn more money and protect

against the expenses that ruin most landlords’ returns. After all, landlords’ losses don’t occur on

“normal” months when the rent comes in, but rather when something goes wrong. Maybe the

tenant stops paying. Maybe the property sits vacant for six months. Maybe the tenant sues you.

Maybe constant turnover is ruining your returns.

In helping you avoid these expenses in a systematic way, we’ll help you do what you really want:

sit back, relax and let the rent money flow in like clockwork each month.

(Oh, and there are frogs. There was a metaphor but it was convoluted so we’ll spare you. So

just enjoy them.)


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Chapter 1: Advertising Vacancies

acancies are awful. They will ruin your returns, by forcing you to make updates and

repairs you wouldn’t otherwise need, by losing money on rent, by requiring a huge hassle

on your part to fill with a good new tenant.

Minimizing vacancies is a recurring theme in this book, because they are so devastating to rental

returns. But they do sometimes happen even if you do everything right, so how do you fill them

as quickly as possible, with the best possible renter?

The Property Itself

Remember three lines ago when we mentioned updates and repairs? About that. If you want a

better class of tenant, you’ll need to make sure the property will appeal to the best type of renter

who’s looking in your neighborhood.

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That usually means new carpets and a new paintjob, at the very least. You may be able to get

away with steam cleaning the carpets, if they are young and not too besmirched by the last

tenants. If your property has hardwood floors, do they need refinishing or polishing, or will a

good mopping do the trick?

Do the bathrooms look noticeably dated? Is there any damage? People have a very intimate

and emotional connection with bathrooms on a subconscious level. Let’s be honest, no one

wants to get naked somewhere that doesn’t feel clean, polished and modern. Even if your

property’s bathrooms are pretty modern, make sure they’re so clean that they positively gleam.

Same question for the kitchen: does it look dated? Ratty? Grungy? Everyone has a similar gut-

level reaction to kitchens as they do bathrooms; on a subconscious level people are either

attracted or repulsed by the place where food is prepared. Make sure your kitchen is up to date,

and spotlessly clean. Like, eat-off-the-floor clean.

From there, review the amenities. Our latest survey of renters found that despite all the new

gadgets and smart-home gizmos available today, tenants first and foremost want the basics. A

washer and dryer. A dishwasher. Central air conditioning. Parking. Consider these, and if

possible, add them. (Tip: you don’t need to buy new appliances – your tenants don’t expect

brand new, they expect good working condition. Your wallet and ROI will notice the difference

in cost though.)

If the neighborhood warrants it, and you still have two nickels to rub together, you can now

consider extras and luxuries to catch the eye. Perhaps an in-sink disposal, or a smart thermostat,

or a smartphone-controlled coffee maker. Maybe a powered towel drying rack or artsy, funky

knobs for the cabinets. But stick with a maximum of one new luxury touch each time you have

a vacancy. And remember: the only justification for these costs is higher rent, and enough of it

to recover the cost within a year or two.

Advertising the Unit

You’ve prepared and cleaned the rental unit, and are now poorer by hundreds – or more likely

thousands – of dollars. It’s time to get the property listed, in as many places as possible.

Fortunately, there are some easy resources for listing properties for rent. Use a rental listing

syndication tool: you enter the data once, and your listing is published on dozens of other rental

listing websites. (Spark Rental will be offering one for free.)

Craigslist is an oldie-but-goodie, and doesn’t accept syndicated listings, so you may want to post

your listing there too.

If your neighborhood is populated with young professionals, you can probably stop there. If it’s

a lower-end neighborhood, or populated with older residents, you should also advertise offline


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in the local newspaper or circulars. Get into the mindset of the residents of this neighborhood:

where do they look for new homes? In what language? Maybe the neighborhood has a large

Hispanic population, and you should advertise in Spanish? And in local Spanish circulars? Get

out of your mindset and into your prospective tenants’ mindset.

As you draft your listing, start with the all-important heading/title. It should be eye-catching

and inviting: “Bright Studio in the Heart of Downtown!” or “Gleaming House on Tree-Lined

Avenue, Just Renovated!”

The rental listing itself needs to walk a delicate balance between being warm and inviting, yet

also easy to read at a glance. We recommend a few summary sentences, followed by a list of

bullet points outlining the amenities, and wrapped up with a conclusive sentence or two at the

bottom. The summary sentences are where you can show your warm and fuzzy side: “Sun-

drenched studio overlooking the Harbor Marina! Cute as a button, it’s perfectly nestled in the

historic Federal Point neighborhood.” You can go on a few sentences, but don’t go on too long.

List all the amenities in bullets, starting with the best selling points. If your property has a hot

tub on the rooftop deck, start with that. Or maybe it has large bedrooms, in a downtown

notorious for shoebox rooms? Lead with that. Include all appliances other than the refrigerator

and oven (these are assumed by renters). Use adjectives and descriptors whenever possible:

“Stainless steel appliances” or “Sparkling marble tiled bathrooms”.

You’re selling something here, and don’t forget it.

Wrap up with some more warm, enticing sentences that beckon the prospect. If you want to be

verbose, this is the place, now that you’ve outlined the selling points in short form. You can

highlight local amenities (“Five-minute walk to Whole Foods”) or gush about how friendly the

neighbors are. Think about why anyone would want to live in this property, or in this

neighborhood, and write about it in glowing terms.

Don’t forget your contact information! The best rental listing in the world will get exactly zero

applications if the prospects can’t respond to it.

Lastly, a word about Fair Housing laws. These are more complicated and subtle than most

landlords think; you can run afoul of them simply based on where you advertise, or by describing

the property in terms of who it perfectly fits. Advertising only in your church’s circular, for

example, is discrimination based on creed. Saying that a tiny studio in a neighborhood of single

professionals is “Perfect for a single professional” is discrimination based on familial status.

Even opting not to lease to people with a criminal record is now considered discriminatory and

illegal. Read more about Fair Housing laws and avoiding lawsuits here.

http://sparkrental.com/fair-housing-pitfalls-6-ways-to-avoid-being-the-next-unwitting-lawsuit/


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Chapter 2: Screening Applicants

ou posted your rental listing, and the applications are pouring in. You hold an open house,

and show the property to all interested prospects. (Tip: Always schedule an open house!

Prospective tenants will no-show on you all… the… time. Don’t waste your time going to

the property separately for every prospect.)

Collect rental applications electronically (soon available on SparkRental.com), and select to

include tenant screening reports: a full credit report, nationwide criminal background check,

identity verification and eviction history report. Select that the applicant will pay for them,

unless you’re running a charity or just like paying bills for other people.

The rental application itself will tell you a glut of information. What does the person do for a

living? How stable is their job and career? Do they have any pets? How many times have they

moved in the last five years?

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http://www.sparkrental.com/


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And many other important data points.

If someone has moved more than once in the last five years, don’t rent to them. Seriously.

What’s the golden rule of maximizing ROI? Minimizing vacancies, which means long-term

tenants.

There’s an old adage among mortgage lenders: a person’s income will tell you “Can they pay,”

and a person’s credit will tell you “Will they pay.” If a person has a history of not paying their

bills, they are unlikely to pay their rent. It’s that simple. Everyone with bad credit has a long

story about why it’s not their fault, but it ultimately doesn’t matter. People tend to either be

responsible about paying their bills, or irresponsible about it, and you don’t want the latter in

your rental unit. Let some other landlord with less discretion take the risk on them.

That being said, it’s important to go beyond mere credit score. Maybe the person has a good

score, but hasn’t established much credit yet? Or perhaps they have a mediocre score, but it’s

because of one medical judgment from an emergency medical procedure? Landlords tend to

simply look at the FICO score and not bother reading the actual credit report, but the payment

history in the report is the real meat. Also look for public records: bankruptcies, judgments, liens

and the like.

In many ways, the eviction history report is even more important than a credit report. Eviction

is the root of the issue when screening tenants: you’re trying to find a tenant you won’t have to

evict. Always, always, always run an eviction history report, on every prospective adult

occupant. If the applicant has been evicted in the last five years, don’t lease to them, period.

That lending adage also brought up income, which is just as important. Call the applicant’s

supervisor, and confirm their employment. Ask about what kind of employee they are – are they

diligent? Are they reliable? Do they show up on time for work every day of the week? Do they

ever come in stinking of schnapps? How likely are they to remain employed there? After talking

to their supervisor, ask to be transferred to the human resources department and confirm the

applicant’s income.

Next call the applicant’s current landlord. If your state has online databases of real estate

ownership, look up the landlord’s name and address, and try to confirm that the person really is

the landlord. Ask them to confirm their zip code, or when they bought the property. The oldest

trick in the book is for applicants to give you their Aunt Sue’s phone number and have her pose

as their current landlord. Call prior landlords too, all of them for the last five years.

If everything still looks rosy, it’s time to roll up your sleeves and really get hands-on. Call the

applicant, and insist on doing a walk-through of their current home. Ask them if they’re home

right now, or near home, and if they say yes, tell them you’re in the neighborhood and will swing

by to give them a sample lease and some other paperwork.

This way, you can walk into their home and see firsthand how they live, whether they have any

undisclosed pets, how they’ve treated their current home. If they’ve desecrated the place, dirty


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dishes piled on the counters, flies swarming everywhere, you don’t want to lease to these

people.

What about criminal history? This has become tricky in the last 5-10 years. In May of 2016, the

Department of Housing and Urban Development (HUD) declared that landlords may no longer

have a blanket policy denying anyone with a criminal record. That does not mean that landlords

must lease to every axe murderer or sex offender that applies, but it does mean that landlords

must take into account the age and circumstances of the crime. Someone who got caught with

a joint 20 years ago should not be denied for that reason alone. Someone convicted of triple

homicide and released early because they provided intel on another murderer? You can still

deny their rental application.

Sex offenders are another tricky topic. Keep in mind that there are degrees of sex offenses, and

not all of them are really sex-related. In some states, peeing behind a bar at 2AM is a “sex

offense” (a friend of mine almost fell prey to that particular law in her misspent youth). Or the

offense could be quite serious. If you have an apartment building filled with families, right next

to a school, you should probably take any criminal history very, very seriously. If you lease a

rancher out in the boonies, maybe a looser policy is in order.

Your neighborhood and property make a big difference in how stringent your standards need to

be. A landlord in a trendy downtown neighborhood will have very different standards from a

landlord at the corner of Drive-By Shooting Street and Carjack Avenue. Know what your

standards are for each rental unit, and stand by those standards until you find the right tenant.


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Chapter 3: Legal Protection: The Lease Package

hen there’s a landlord-tenant dispute, what do you think the first thing the judge asks

to see? Ding ding ding! That’s right, the lease package.

Disclosures & Addenda

Note that we said “lease package” and not “lease agreement.” A lease agreement, AKA rental

agreement, AKA lease contract, AKA tenancy contract and so on, is just the contract itself. But

a legal lease package must usually include other documents as well: state-specific disclosures,

federal disclosures, addenda specific to the property type or situation.

I managed a company that sold state-specific lease packages as its primary product for many

years. The average length of the lease contract itself was five pages. The average length of the

entire package? Nineteen pages.

Those extra addenda and disclosures are what made the difference between a lease that was

legally enforceable in court and a lease that the judge would toss out. They’re the difference

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between a tenant’s lawsuit being dismissed summarily by the judge, or being allowed to move

forward and wreak havoc on your finances.

That’s one of many, many reasons why you should never ever download a Word template of a

lease agreement off the Internet and think you’re set. We will soon be offering them, but no

matter who you buy from, be sure to use a fully state-specific, legally protective, comprehensive

lease package including all necessary disclosures and addenda.

State-Specific Clauses

These are not a myth that people like me made up in order to sell more products. Many states

have clauses that must be included in your lease contract.

The reverse is also true: many states prohibit certain clauses that are common in other states’

leases.

Each tenancy is different, so you can’t use a template lease found on some dodgy site offering

freebies. Spend the $25-30 to buy a good lease package that’s specific to this exact tenancy.

State Restrictions

Another reason templates won’t help you: each state has different restrictions on what you can

and can’t do as the landlord. For example, what’s the maximum amount you can collect for the

security deposit? When can you charge a late fee, and how much? Can you charge per diem late

fees?

You can look these up for your state, and you should. Or, let us give you the information as you

need it: our State Law tips provide help as you fill in these details for your lease package.

Protective Clauses

A comprehensive lease package includes a whole slew of legalese clauses designed with one

goal in mind: to protect you from lawsuits, and to protect your property from damage. Okay

that was actually two goals, but the point is this: your lease package is not a formality. It should

be an impregnable legal fortress to protect you and your investments.

For example, most states allow landlords to require that tenants get renter’s insurance, and

most renter’s insurance policies cover much of the liability if someone is hurt in the property or

if the tenant’s belongings are stolen or damaged.


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Speaking of items being stolen, a good lease agreement specifically says that the landlord does

not guarantee security or safety, and that they are not liable for damaged or stolen items.

Another example: good lease agreements explicitly state that the tenant is responsible for

making sure the smoke detectors and carbon monoxide detectors are operational at all times.

We could go on with examples of clauses that good lease contracts include. But that would be

tedious for both of us, and you get the point.

When the time comes to sign the lease package, meet the new tenants at the rental property to

do it. Walk through every room of the rental unit with them, and document every scratch, every

scuff, every carpet stain or fiber out of place in the curtains. Turn on the timestamp function on

your camera, and take pictures of every room, every wall and every issue.

Sign a Move-In/Move-Out Walkthrough Checklist with them, to document exactly how spic and

span the property is at move-in. Later, when the tenants move out (hopefully many years later),

you’ll be able to hold them to a much higher standard, because you have hard evidence of

exactly how the property looked when they moved in.

Lastly, keep the signed lease package (including the Move-In/Move-Out Walkthrough Checklist

and all other disclosures and addenda) in an easily-accessed file. If your lease package is digital

and e-signed, make sure you print hard copies and keep backups of the digital file.


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Chapter 4: Automating Rent Collection

ick of hearing the line “Check’s in the mail”? I used to hear that line every month. Now I

don’t accept checks. Or money orders. Or even cash.

I collect my rent electronically, and automatically, every month. For my better properties,

I accept ACH transfers of the rent each month – the tenant clicks a button and the rent is sent

electronically to land safely in my checking account. The tenants never see my bank account

information, either. (Not that there’s much they could do with it, but I sleep better knowing my

tenants don’t know anything about my financial accounts.)

For my lower-end properties, I insist that the rent be deducted from the tenant’s payroll

automatically each pay period. They can’t blow money that never reaches their hands, no

matter how much they like Keystone Light.

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Automated Clearing House, or ACH, payments are electronic transfers of funds between two

bank accounts, using the Federal Reserve’s banking network. It’s extremely secure and

relatively inexpensive, but it’s not the fastest way to send money electronically.

Credit card transfers are a faster way to send money, and can be useful for tenants who don’t

have all the funds available or just love their rewards… but they’re not cheap.

However you collect the rent, do yourself a favor and automate it, so that you don’t have to wait

for the tenant to get around to writing a check, going to the post office and mailing it, and then

you having to endorse it and deposit it. Checks are a vestige of the 1900s. Seriously.

By collecting the rent electronically, you can also track your income and expenses easily. The

rent is automatically listed in your online rent ledger, and you can manually add expenses like

repairs, or additional payments like an offline utility reimbursement.

Make a Mid-Year’s Resolution (that’s actually fun to keep): no more paper checks. No more

envelopes. No more bank runs. No more “Check’s in the mail!”

(Insider Tip: Spark Rental will soon be offering electronic rent payments via ACH, credit card and

rent deductions from payroll. It’s on double secret probation right now though, so keep an eye

out for it in the months to come!)


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Chapter 5: Retention: Keeping Renters Happy

Whew! You went through all the hassle of updating your rental property, screening applicants,

creating and e-signing a state-specific lease package, and setting up automatic rent payments.

The rent is magically appearing in your bank account each month. This is great! Time to go to

Italy for the year, right?

Well, actually, yeah you probably can, if you have enough rental income. But that doesn’t mean

you should completely ignore your property and tenants.

Renters want to know that you’re there for them when they need you, and that you care about

them and about the property. A relationship with them, however business-oriented, goes a long

way in keeping them happy and firmly settled in your rental unit. That doesn’t mean you have

to show up in person every month, bouquet in hand (although you should inspect your property

quarterly), but there are some things you should be doing.

Everyone likes lists, so here’s a list of ways you can build and maintain a warm-yet-professional

relationship with your renters:


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1. Know their Children’s Names and

Ages

People are funny about their children. Sure, you know the tenant’s name (you have to), but it

makes them feel like you care about their family if you know their children’s names. You don’t

have to actually remember the rugrats’ names, you just need to reference the rental application

in your file, so that when you call the tenant, you can spend 60 seconds exchanging pleasantries

about Little Johnny’s latest little league accomplishments before getting down to business.

Think of it as a psychology hack – you’re priming the renter to respond favorably to whatever

you called them about. You’ll also have a sense of when the kids might be getting too big for

your rental unit, or when the kids might be moving out, so that you’ll be prepared for the

increasingly likely vacancy.

2. Ask About the Tenants’ Careers

There’s an art to doing this in an “I care” kind of way and not imply “I only care about whether

you can pay rent.” First, be sure to reference their actual job (like the children’s names, you don’t

have to remember it, it’s in the rental application!). Second, try to reference an event or feeling

that they expressed about their job the last time you asked. “Joan how’s the bakery these days?

The last time we talked you said you had started taking on corporate orders, how’s that

coming?” Just keep a brief note in your file, you don’t have to be a savant with a perfect memory

about every tenant. If the tenant’s job is not going so well, you’ll know to be prepared for a

default. If they lose their job, do what you can to help connect them with a person or service

who can help. They will remember it forever, and if they get a new job quickly they stay in the

property with no defaults.

3. Ask About Updates They’d Like

Once a year, call them and ask them about their perfect home wish list for updates around the

property. This is delicate, so you have to do it right. Here’s the script, post-pleasantries: “I don’t

have the money to make any property updates right now, but I want to take care of you when I

can, and I want the property to be the best it possibly can. What updates around the property

would make the most difference for you, so I can keep them in mind over the next nine months

or so?” Write down exactly what the tenant says, and save the list in the property’s file.


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4. Offer to Make One of Those Updates…

For a Lease Extension

Pick the update that would make the biggest difference in the property’s billable rent and

marketability. A few weeks after the initial phone call with the tenant, call them back and say

“Look, I’ve thought about what you said last time we talked, and I’ve been looking over my

finances. I’m open to pulling together the money to do _______ update, if you’re going to be in

the property for a while. Are you interested in staying for another two years?” Occupancy and

stability are the name of the returns game.

5. Send Holiday Cards

It would help if you know their religion, so you can send them a religion-specific card, but don’t

push the boundaries of Fair Housing laws by asking. If you don’t know, just send a generic

“Happy Holidays” card, and address it to the entire family including the children (because you

know their names, right?). Give them warm wishes for the year to come, and thank them for

being such a wonderful tenant for the last year. Seriously, this costs you $3 and can keep tenants

from even thinking about leaving. If you really want to warm the cockles of their hearts, include

a $25-50 Best Buy or Amazon gift card.


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6. Be Responsive!

When tenants call you about a necessary repair, the first thing you need to do is reassure them

that you care, and you’re on top of it. Express your concern, tell them that fixing it is your highest

priority. Have several contractors and handymen (is that term sexist? I don’t know… there are

a few handywomen out there, but I’m guessing like 6% of the industry? At 94% is generalization

allowed? But I digress from contractors) in your virtual Rolodex, so that you don’t have to

frantically call friends and relatives asking for referrals on electricians or plumbers or roofers.

Being responsive in a crisis shows your tenants that they can rely on you, that they’re living in a

home that’s well cared for and managed by someone who cares.

7. Send Flowers or Food if Tragedy

Strikes

If something awful happens to one of your tenants, for example they lose a family member, send

them flowers or food with a kind, genuine handwritten note. Don’t send money, or take money

off the rent. The purpose is to offer a human gesture, a personal gesture; you’re not trying to

offer charity, it’s not a pity gift, you’re reaching out as one human being to another.

8. Call by Phone for Big News

Are you non-renewing the tenants’ lease agreement? Renovating part of the building? Raising

the rent? Yes, you still need to send written notices, to comply with state laws and leave a paper

trail, but you should also make the human connection and give them a courtesy phone call. Be

kind, be compassionate, be firm and be prepared to be flexible if new information comes to light.

And since raising the rent is such a pivotal moment for your rental units’ occupancy, we’re

devoting an entire chapter on how to do it without leaving a trail of vacant units.


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Chapter 6: Raising the Rent… Without Losing

Tenants

o one wants to hear their rent is going up. This is a critical intersection, where you can

either secure an occupied rental unit for another lease term, or you can alienate your

renters and send them packing for another home. Which means you need to be

prepared for it, and handle it with poise and grace.

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Here are six tips (yay, another simple list!), to maximize the chances your rent raise will result in

a renewed rental agreement, rather than renters racing to retreat.

Tip 1: Do Your Research

What is the appropriate market rent for your unit? This isn’t an exact number, but a range, such

as $1,700-1,950. Look at rental listing websites for comparable units, and find examples that are

as nearby and as similar as possible to yours. If your unit is on the high end of the appropriate

rent range already, you probably shouldn’t raise the rent. (Even so, don’t let the opportunity go

to waste – see Tip #4 below to still come out ahead.)

If the current rent is low for your market… congratulations! You’re due for a raise. Find as many

comparable units as you can, that are going for higher rents. Keep these handy just in case you

feel obliged to share them with your tenant (but don’t do so without a good reason – it just

invites an argument over the rent).

You also need to research any limitations on rents in your area, and on when you need to inform

the tenants of the increase. Which brings us to…

Tip 2: Legal Notice

Most states require 30-90 days’ notice before raising the rent. That means you need to know

your state’s laws, long before thinking about raising the rent. When you sign a new lease

agreement, set a reminder for yourself for four months before the lease term expires. At that

time, evaluate the market rents in your area, and decide if you want to raise the rent. If you do,

double check your state’s laws and make sure you send a written notice well before the legal

notice deadline.

This doesn’t just protect the tenant – it also protects you. If the tenant informs you they’re

moving at the end of the lease term, it gives you plenty of time to advertise the unit and find a

new tenant, before the current tenant moves out.

Tip 3: Give a Courtesy Call

As mentioned above, when you mail the notice, call your tenant to give them the courtesy of a

heads-up. No one likes to read bad news in their mail. It’s impersonal and invites resentment.

Call them, and say something along the lines of “Look, I know this isn’t what you want to hear,

but I wanted to call and give you a heads up that I have to raise the rent when the lease

agreement renews. The City raised taxes on me, and I’m trying to stay above water with my

mortgage. I am sorry, and I wanted to give you the courtesy of a phone call before you got the

notice in the mail.”


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There are also several ways to soften the blow. One is to tell the tenant about an upcoming

improvement to the property that is being planned, that will make it a better place to live. You

can also soften the blow by adding “The good news is that you won’t be required to sign a new

lease agreement, it simply rolls over to month-to-month.”

Tip 4: Offer a Longer Lease Term

Don’t like the idea of the lease rolling over to month-to-month? Then scratch that idea above.

Here’s a better one: give them the bad news that the rent is going up, but offer to let them lock

in that rent for two or three years by signing a new rental agreement. Script: “That way, we

won’t have to have the same conversation next year, and you can plan your finances knowing

that your rent is stable and locked in.”

This tactic works great, even if you don’t feel like you can raise the rent, because your existing

rent is already high. Try this out: “Hi Jill, I wanted to call and touch base with you because your

lease is ending soon. We’re not asking you to leave or anything like that, but I did want to call

and give you a couple options. Some of the units in the building have rent that’s going up, but

you’ve been a good tenant, so before your lease expired I wanted to call and offer to let you stay

and lock in your current rent for another two (or three)

years.” They sign a new lease agreement, and you get an

occupied rental unit for the next two or three years, at a

strong rental rate. Double win!

Tip 5: Be Flexible &

Consider Alternatives

There are always a few tenants who simply will not pay

more rent, and will move out if you raise the rent on

them. If your tenants tell you so, consider letting them

stay on at their current rent… if they’re willing to sign a

two- or three-year lease agreement. That way, you may

not get the rent increase you wanted, but you’ll still get

stable occupancy for the next several years.


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Tip 6: Spring Forward

The rental industry is more seasonal than you think. Guess who moves in December? People

who don’t have a choice. Most stable renters move in late spring or summer, which means that

you can time your rent increases to maximize the number of new prospective tenants looking to

move in, if your current tenants decide they’re moving at the end of your lease term. Time your

rent increase to go into effect in June or July (which obviously requires that you send notice long

before then), so that you can find a new tenant to move in the day after the old tenants vacate,

if they insist on moving out.

There are some things you should always keep in mind, when raising the rent. The first is to

remember to be compassionate when you call tenants – you’re delivering bad news. This is yet

another reason why it’s so important to have a human relationship with your tenants, like we

discussed in the last chapter. If your renters feel like you know them as people, and not just as

dollar signs on a spreadsheet, they’ll be far more likely to stick around even if you do occasionally

have to raise the rent on them. Also, remember that you cannot raise the rent in the middle of

the lease term, under any circumstances. Lease agreements are legal contracts that bind both

parties, and part of your contract is that the price of rent stays the same for the entire lease term.

Under no circumstances can you raise the rent out of retaliation. If you raise the rent only on the

one tenant in the building you don’t like, they have grounds for a lawsuit. Lastly, remember the

refrain we’ve been singing: vacancies are the downfall of returns. Higher rents are nice, but if

you have to go through a turnover just to get a few extra dollars a month, it’s almost never worth

it. If you have good tenants who might leave if you raise the rent, have them sign a long-term

lease agreement instead.


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Chapter 7: Move-Out & Preparing for the Next

Tenant

ull circle! The tenants are having a baby and need another bedroom, or they got a job in

another state. Despite how you well you’ve cultivated your relationships with tenants,

sometimes people just move.

After getting a firm move-out date from the tenants, explain that you’ll be advertising the rental

unit and will need to walk new prospects through the property, but that you’ll give them a day’s

notice (or two days’ notice, if your state’s law requires) before walking anyone through. Tell

them you understand that they’ll have many of their belongings in boxes, but ask that they

please keep the unit as clean as they can.

Get that rental listing posted online, and start showing the property.

Remember how we said earlier “Always schedule an open house”? This is the exception to that

rule; you can’t have an open house while the old tenants are still living there. You’ll have to walk

F


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prospects through individually, and keep your eyes on them at all times. The last thing you need

is for the old tenants to call you up screaming because something went missing from their home.

Ask the tenants to please leave the rental unit in the same state as when they moved in – which

is to say spotlessly clean. Don’t threaten their security deposit, just mention it: “…so we can get

that security deposit back to you in full and right away.”

Schedule a date and time to do a post-move-out walkthrough with them, within a few days of

them moving out. Take the original Move-In/Move-Out Walkthrough Checklist (from all those

many years ago!), and turn the timestamp function back on in your camera. Take photos of each

room, and write down every single piece of damage that wasn’t there when the tenants moved

in.

There’s a fine line between “normal wear and tear” and damage. The occasional carpet stain?

Normal wear and tear. A big burned section of carpet? Damage. Occasional scuff marks on the

wall are normal wear and tear. A hole punched through the drywall is damage. You can’t deduct

money from the security deposit for normal wear and tear, but you can – and should – deduct

money for every bit of damage.

Most states have strict laws on the window of time that landlords have to return the security

deposit or provide a list of deductions. It’s usually in the 10-20 day range, so move fast when

your tenants move out.

If you haven’t found new renters by the time the old tenants move out, hold an open house, and

do all the things we talked about in Chapter 1. Remember that you will often need to replace

the carpets, and/or paint the house, and/or do any number of other upgrades to make the house

modern and appealing for your neighborhood.

Vacancies are expensive! And time-consuming. And annoying. Here are a few last words on the

subject.


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Outroduction

urnovers are where most losses occur for landlords. You want stable, long-term tenants,

with a history of paying their bills on time and not being evicted. If I sat down with the

laziest landlord in the world (e.g. myself ten years ago), and I knew they’d only pay

attention to one piece of advice, I’d tell them screen your rental applications aggressively.

Don’t lease to anyone who looks marginal. Nothing ruins your property’s returns faster than bad

tenants.

Pull credit reports and criminal reports. Actually read them. Run eviction history reports. Call

employers and supervisors. Call old landlords. It sounds like a pain in the gluteus maximus, but

the investment of time will come back to save you a world of hurt and money in the future.

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We’ll soon be launching a service to help automate all of the tasks described in this book for you.

But regardless of what companies you work with, be thorough in your tenant screening, and use

a state-specific lease package. You’ll be glad you did, and you’ll laugh all the way to the bank.

Or rather, you’ll laugh while sitting by the swimming pool sipping a daiquiri, because your rent

was already direct-deposited at your bank.

Liked this book? Have questions? Drop me a line at [email protected], or send us a

message on Facebook or Twitter. We love talking to readers, especially when we can put a face

to a name.

Oh and pat yourself on the back – you just read an entire e-book!

Happy trails!

mailto:[email protected]

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the spark rental guide to higher roi - snap landlord€¦ · maybe constant turnover is ruining...

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