1) Their Property Is Not Properly Shielded
Every few months, one of our owners gets attacked by a hostile tenant. Most of these are disputes over the security deposit, an option fee or some minor repair. The good news is that these attacks are relatively harmless as the tenant is looking for compensation for under $3k. The bad news is that we can’t help the owner if the tenant reaches out and touches the owner. We have seen owners loose sleep for weeks defending themselves. These owners develop anxieties about the event and some get so distraught, they sell the property. Even though Limestone has the authority to manage the property, tenants will attack the owner if they can reach them because they know the owner is not accustomed to the attack and likely to cave in. Tenants love to exploit newbie owners. There are three different levels of shielding a property:
* Minimum (Change Address of Record) – This is the least expensive solution. Go down to the nearest Private Mailbox store (not a US Post Office) and open up a private mailbox. This has a physical street address and costs between $15 – $30/month. Mail a change of address form to the Clark County records department. Be certain to write down “Suite 123” not “PO Box 123” as they will reject it. You need to convey to the records department that you have an office address – not a PO box.
* Highly Suggested (Create An LLC) – Get a registered agent to setup your LLC and then transfer the property title to the LLC. Be sure not to name the LLC with your name! This will defeat the entire purpose. When you do this, it’s nearly impossible for a tenant or a lawyer to grab you. This will run between $400 – $500 a year but you can put a bunch of properties into one LLC to keep your costs down. I recommend no more then 5 properties in one LLC.
* Maximum Protection (Create An LLC Inside a Trust) – This is like having a fortress with a wall and a moat. Unless someone has a lot of money and persistence, a tenant won’t get past these defenses. If you are older than 50, you should do this anyway. If you and/or your spouse gets hit by a bus simultaneously, this asset structure is the most effective way to transfer assets to whoever you want. Every year, we see houses and properties get burnt to the ground by tweakers because the property languished in the courts for nearly a decade. You are going to die eventually so just do it.
WARNING – An owner should never never never let the tax record address OR the HOA notification address be the same as the rental address. Tenants will toss tax notices and HOA fines in the garbage while the property accumulates thousands of dollars worth of fines and/or liens.
2) The Owner Rents to a Friend or Family
Owners who do this will put an end to joyful Thanksgiving dinners. Every month, we toss a daughter, cousin, or friend. Every single one of them said to us “This is different” before they moved in. No. Tenants are not different. Renters don’t behave like owners and the expectations between an owner and a tenant are huge. Owners can’t wrap their mind around the way a renter lives or doesn’t understand why a tenant doesn’t pay rent on time. Tenants rent for a reason: They don’t have the financial discipline to own a house. If an owner really wants to help someone, they can write them a check so their friend or family can pay rent to someplace else. Done. Thanksgiving is not a disaster. Beers all around.
3) The Owner Dilly Dallies On A Rehab
Owners who spend 2 months getting a property ready are just losing money. That meager amount of money they saved to do it themselves didn’t come close to the opportunity lost in getting it rented. For example, we had one property that just needed cleaning ($300 expense) and we had to wait 2 months to get it rented so the owner could drive from California to clean it themselves. The drive and lodging alone cost him $300.
4) The Owner Balks At What Was Advertised
They didn’t pay attention to the property management agreement which determines what we advertise. Utilities are probably the most commonly disputed difference. We recommend owners pay sewer and trash because those utilities can create a lien on the property if they are not paid. Owners who didn’t pay attention to this agreement will occasionally balk at paying those utilities once we get a tenant approved. This false advertising can cause a new tenant prospect to walk away. NOTE: Owners who require tenants to pay sewer and trash usually end up paying it anyway and have to go through the agony of getting the lien removed. It’s just easier to increase the rent to cover those utilities and be done with it.
5) A “Self Managed” Owner Lets Tenants Slide
Many tenants will see how far they can get away with paying rent late. Tenants will sing a Country Western song to bamboozle an owner. The owner then allows the tenant to pay a few days late. Then again and again… After a period of time, the tenants owe a couple months rent. It’s best for owners to allow one time and then spank the tenant harder and harder each time thereafter. A late paying tenant will either correct themselves or get evicted based on late fees. We charge a very modest fee for spanking tenants so there is no reason for an owner to wait to contact us.
6) An Owner Puts Earrings On A Pig
New appliances, granite countertops, gorgeous landscaping etc are wasted on most rental properties. Some tenants will likely chew that stuff up and spit it out. Clean and simple is all an owner needs. An owner should tile everything possible unless it’s the second story. They don’t need to bother landscaping the back yard either. An owner needs to imagine 30 twelve year olds having a birthday party in their house every month because they will eventually get one of those tenants.
7) The Owner Lets The Tenant Manage a Pool
Huge mistake! Tenants are likely to destroy the pumps and equipment, and wreck the plaster. Owners need to let a professional take care of the pool and build the cost into the rent. Pool companies also make great snitches. If something is going sideways at a property, pool companies will let us know.
8) The Owner Doesn’t Leave Keys & Remotes At The Property
There is nothing more frustrating to the tenant or to us than spending a week chasing down a $2 key. Nearly every week, an owner has to cough up $50 because the garage remote is still in California. Owners who leave the mailbox keys, gate keys, pool keys, dog house keys, garage remotes and everything they can think of in the kitchen drawer get a round of applause.
9) The Owner Sits On An HOA Violation
An owner who doesn’t tell the HOA that we should be notified of violations is looking for trouble. Every month, some poor owner takes a cruise while some HOA with OCD piled on $300 worth of fines for weeds. Owners who keep the rental address the same as the address for notifications is sitting on a time bomb. The best way to prevent HOA love letters from getting lost is to have the HOA send a copy to us.